If you have fallen behind on your mortgage, you may be able to sell your house before the foreclosure sale, pay off the loan and keep any equity that is left. Timing is everything. This guide explains how foreclosure works, the options you still have, and how to sell quickly if selling is the right move.
How foreclosure works
Foreclosure is the legal process a lender uses to take and sell a home when the loan is not paid. Under federal mortgage servicing rules, a servicer generally cannot start the first foreclosure filing until you are more than 120 days behind, which gives you time to act. After that, the process depends on your state:
- Judicial foreclosure goes through the courts and often takes many months. States that use it include Florida, New Jersey, Ohio, Indiana and South Carolina.
- Non-judicial foreclosure follows the power of sale in the deed of trust and can move much faster once the notice of sale is given. It is the usual route in Texas, California, Arizona, Georgia, Tennessee and Nevada.
A typical foreclosure timeline
Every state and every loan is different, but most foreclosures move through the same stages. Knowing where you are tells you how much room you have to sell.
- Missed payments (months 1 to 4). Late fees start, and your servicer contacts you about options. Federal rules generally stop the servicer from making the first foreclosure filing until you are more than 120 days behind.
- Foreclosure starts. In a judicial state the lender files a lawsuit and you are served. In a non-judicial state a notice of default or notice of sale is recorded, mailed or published.
- Sale date is set. In judicial states this comes after the court rules, often many months in. In non-judicial states it can be only weeks after the notice.
- Foreclosure sale. The house is auctioned. In some states, such as Ohio, the court must still confirm the sale, and the owner can redeem the house until it does.
- After the sale. If the house sold for more than what was owed, the extra money (surplus) is handled under state law. If you are still in the house, the new owner can start the eviction process.
Selling works best in stages 1 to 3. The earlier you start, the more buyers and options you have.
Can you sell your house in foreclosure?
Yes. Until the foreclosure sale happens, you still own the house and can sell it. The sale price pays off the mortgage, back payments, late fees and the lender’s costs, and anything left goes to you. Selling also avoids having a completed foreclosure on your credit report, where it generally stays for seven years from the date of the foreclosure.
A simple example (made-up numbers, to show how the math works): say your house would sell for $210,000 as-is. You owe $150,000 on the mortgage, plus $9,000 in missed payments and $3,000 in late fees and the lender’s foreclosure costs. Closing costs on your side come to $4,000. At closing the title company pays the lender $162,000 and the costs, and about $44,000 goes to you. If the house goes to a foreclosure auction instead, it may sell for less, more fees pile up, and you have no say in the price. Ask for a payoff statement to get your real numbers.
Your options before the foreclosure sale
- Reinstate the loan by paying everything that is past due, if you can.
- Loan modification or repayment plan. Call your servicer and ask about loss mitigation; a HUD-approved housing counselor can help for free. If you send the servicer a complete loss mitigation application more than 37 days before a scheduled sale, federal rules generally bar it from going ahead with the sale until it has reviewed your application, and it must evaluate you for every option it offers within 30 days.
- Sell the house and pay off the loan. This works when you have equity, or when the sale covers most of the balance.
- Short sale if you owe more than the house is worth, with the lender’s approval.
- Deed in lieu of foreclosure, where the lender takes the house back by agreement.
How to sell quickly during foreclosure
- Find your sale date on the notice you received, or ask your servicer.
- Get a payoff statement so you know exactly what the lender is owed. Ask in writing early: the usual seven-business-day deadline for payoff statements does not apply once a loan is in foreclosure, so it can take longer.
- Get a cash offer. A cash buyer can close in days rather than the 30 to 45 days a financed buyer needs, which matters when a sale date is close.
- Tell your servicer you have a signed contract; some will postpone a sale when a closing is scheduled, but do not count on it.
- Close through a title company or attorney, who pays the lender directly at closing.
Watch out for foreclosure rescue scams
Be careful with anyone who asks for upfront fees to stop a foreclosure or wants you to sign your deed over before a formal closing. See how to avoid we buy houses scams.
Checklist: selling a house in foreclosure
- Find the foreclosure sale date, or the court case number if you are in a judicial state.
- Request a written payoff statement from your servicer.
- List other liens: a second mortgage or HELOC, unpaid property taxes, HOA dues, judgments.
- Gather your deed, your most recent mortgage statement and any letters from the lender or court.
- Decide whether you want to keep the house (reinstatement or modification) or sell it.
- If you are selling, get a written cash offer and compare it with what a listing would net after repairs and time.
- Check the buyer: a real title company or attorney, no upfront fees, no signing your deed over before closing.
- Send your servicer the signed contract and the title company’s contact details.
- Keep reading every notice you get until the loan is paid off at closing.
Frequently asked questions
Can I sell my house after I get a foreclosure notice?
Yes. You own the house until the foreclosure sale (and in some states, until the court confirms it), so you can sell it and pay off the loan at closing.
Do I get any money if I sell during foreclosure?
If the sale price is more than everything owed on the house, the difference goes to you at closing. The payoff statement and the closing statement show the exact numbers.
What if I owe more than the house is worth?
Then a regular sale won’t cover the loan. A short sale, which needs the lender’s approval, or a deed in lieu may be options. Talk to your servicer and a housing counselor.
Will selling stop the foreclosure?
Once the sale closes and the lender is paid in full, the foreclosure ends. Until then it keeps moving, so a signed contract alone does not guarantee the sale date will be postponed.
How long does a foreclosure stay on my credit report?
Foreclosure information generally stays on your credit report for seven years from the date of the foreclosure. A sale that pays the loan off avoids that entry, though missed payments before the sale are still reported.
How fast can a cash buyer close?
Often in 7 to 14 days once the title work is done, because there is no loan approval or appraisal to wait for. See how to sell your house fast for how a cash sale compares with a listing.
Is it ever too late?
The closer you are to the sale date, the fewer options remain, but a sale can often still close if you start right away. If the sale has already happened, some states give a redemption period; ask an attorney. Selling in a city where we have a local page? See Columbus, OH, Memphis, TN or Jacksonville, FL. Learn more about the consequences of foreclosure and pre-foreclosure.
This article is general information, not legal or financial advice.
Facing a foreclosure date? Tell us about your house and a local cash buyer will make you a fair, no-obligation offer, usually within 24 hours. Get your free cash offer or call (727) 208-1229.
