Can I sell my home if it is in foreclosure?

The current pandemic has thrown the global economy into a tizzy, and as a result, a lot of us have found ourselves out of a job. Not being able to earn enough translates directly into not being able to pay off debts on time, and no debt makes a homeowner sweat as much as a home mortgage. If you’ve received a foreclosure notice, it means you’ve not been able to keep width your monthly mortgage payments. If you’re asking yourself, ”Can I sell my home if it is in foreclosure?, the answer is yes. Here’s a short read to help you understand the choices that lie ahead of you.

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What is foreclosure?

If you’ve missed four consecutive mortgage payments in a row, you will receive what is known as a foreclosure notice from your lender. This gives your lender the right to auction off your home or take possession of your home to recover the balance payments and interest pending towards your home. 

Depending on how you negotiate with your lender, the foreclosure process could take from six months to a year. During this period of time, you could sell your house and pay the mortgage company everything you in back payments, interest, and penalties. Some states also offer you what is called a “Statutory Right of Redemption,” which allows you the opportunity to buy back your home within a limited time period after selling it. Depending on where you are, that time period could be 30 days all the way up to two years.

The period from when you receive the notice until the mortgage company or bank you owe either takes possession of or auctions your home is known as the pre-foreclosure period. This is your window to avoid foreclosure, and in the process, save your credit score as well.

Selling your home while facing foreclosure

1. Act quickly

Once you know you’re facing foreclosure, don’t wait until the last minute to start selling your home. The earlier you get the process started, the sooner you will be debt-free.

2. Inform the lender

Keep the mortgage company informed that you plan on listing your home for sale to be able to pay off your back dues and avoid foreclosure. This will also give you an opportunity to open a dialogue with them about extending the auction or repossession date to give you a chance to repay your debts.

The sooner you make the decisions and inform your lender, the more time you have on your hands. Some states require lenders to wait up to a year before they sell a home, others give them the authority to do so in a month. Make sure you clearly understand how long you have before your home goes under the hammer.

3. Hire an agent

Hire the services of an experienced real estate agent to help you with the sale process. Using the services of a listing agent is a sure-fire way of ensuring your home gets the visibility needed to hasten the sale, as well as ensuring you get a fair price for it.

A good realtor will also be able to negotiate with your lender to agree to a short sale and accept a lower amount.

4. Consider a short sale

A short sale is where you sell your home for less than what you owe. Most lenders agree to let you short sell your home because foreclosures entail a lot of unnecessary work in terms of foreclosing, repossessing, and then reselling your property. All of that costs them money as well. While a short sale is a desperate measure for lenders to agree to, it saves them money and effort.

Other ways to avoid foreclosure

Here are some other ways you can avoid your home being sold at auction.

1. Deed in lieu of foreclosure

This is when the homeowner basically surrenders the house to the bank or lender to avoid foreclosure. While this is rarely seen in an equitable market, it is still an option.

2. Request forbearance

Request your lender to suspend or reduce some of your payments temporarily to help you get your finances in order.

3. Modify loan

Ask your bank if they will allow loan modification to allow you to clear your payments. Some lenders will allow you to change your payment schedule so you can pay your dues over time or even reduce your interest rate to ease your burden.

Written by Narayan Shrouthy. June 14, 2021

Narayan is a content writer for Kukun. With experience in both content writing and editing, Narayan mixes his writing and love for reading with his passion for music. As an active musician, He aims to be a key player in Kukun's content experience.