Guide
Can You Sell Your House If It Is in Foreclosure?
Yes, you can usually sell your house while it is in foreclosure, right up until the foreclosure sale, as long as the sale pays off the loan. If the home is worth more than you owe, you keep the leftover equity. If it is worth less, you will need the lender’s approval for a short sale.
A foreclosure does not take away your ownership until the sale actually happens. Until then, the home is still yours to list, sell and close on. The key is timing, because the buyer’s closing must happen before the auction date. If you would rather stay, check the options on the main page about how to stop foreclosure first.
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Should You Sell or Try to Keep the Home?
You should sell when you cannot afford the payment even with help, and you have equity you would lose in a foreclosure. You should try to keep the home when a modification, repayment plan or other option can bring the payment within reach.
| Your situation | Likely best move |
|---|---|
| You have equity and cannot afford the home | Sell on the open market and keep the proceeds |
| You owe more than the home is worth | Ask the lender about a short sale |
| Your hardship is short-term | Ask for forbearance or a repayment plan |
| Your income is lower for good but steady | Apply for a loan modification |
| A sale date is days away | Get legal help right away |
How Do You Sell a House in Foreclosure?
You sell a house in foreclosure by finding out exactly what you owe, pricing the home to sell quickly, and keeping the servicer informed so it can postpone the sale if needed.
- Get a payoff statement. Ask your servicer in writing for the amount needed to pay off the loan by a set date. The CFPB’s mortgage rule requires it within 7 business days of a written request (12 CFR 1026.36(c)(3)).
- Estimate your equity. Subtract the payoff, other liens, agent fees and closing costs from a realistic sale price.
- Hire an agent who moves fast. Say up front that there is a foreclosure date and share it.
- Price to sell. A slightly lower price that sells in weeks beats a higher one that misses the sale date.
- Send the contract to your servicer. Ask in writing for a postponement of the sale until the closing date.
- Close before the auction. The title company pays off the loan from the proceeds, and the foreclosure is dismissed.
Payoff amounts include missed payments, interest, late fees and foreclosure costs, so they are often several thousand dollars higher than the loan balance on your last statement.
How Do You Avoid Quick-Cash Buyer Traps?
You avoid quick-cash buyer traps by getting a market value first, refusing to sign over your deed before closing, and reading every document before you sign. Homes in foreclosure attract buyers who make lowball offers or run outright scams.
- Lowball cash offers: a quick offer far below market value can wipe out your equity. Compare it with an agent’s price opinion.
- Deed transfer schemes: never sign your deed to someone who promises to rent the home back to you or let you buy it back later.
- Upfront fees: do not pay anyone to “save” or sell your home before the work is done.
- Pressure to skip a lawyer or title company: a real buyer closes through a title or escrow company.
Common tactics are described in foreclosure scams, and a free HUD-approved counselor from HUD’s counselor search can review an offer with you.
What If the Sale Date Is Very Close?
If the sale date is very close, ask the servicer in writing to postpone it, send proof of your signed contract and closing date, and talk to a lawyer the same day. Servicers often agree to a short postponement when a sale will pay them in full, but they do not always have to.
In some states, a court can delay a sale, and filing bankruptcy stops it for a time. Those steps are covered in how to stop a foreclosure sale. If the auction happens anyway and the home sells for more than you owe, you may be able to claim the surplus money, which is explained in what happens after foreclosure.
Example
The following is a fictional example. Paul owes $160,000, and his payoff with fees is $171,000. His home is worth about $240,000. A sale date is 10 weeks away after he lost his business.
He lists the home at $235,000 and accepts an offer in 2 weeks with a 30-day closing. He sends the contract to his servicer, which agrees to postpone the sale by one month to be safe. At closing, the loan and costs are paid, and Paul walks away with about $50,000 after agent fees and closing costs.
FAQ
How Late Can You Sell a House in Foreclosure?
In most states you can sell until the foreclosure sale happens, as long as the sale closes and the loan is paid off before the auction. Some states also give a short redemption period after the sale, so ask a local lawyer.
Do You Keep the Money If You Sell Before Foreclosure?
Yes. After the mortgage, fees, other liens and closing costs are paid, any money left over is yours. That is the main reason to sell before a foreclosure sale if you have equity.
Will the Lender Stop the Foreclosure If You Have a Buyer?
Many servicers will postpone a sale if you show a signed contract and a closing date, but they do not always have to. Ask in writing and keep pushing toward a closing before the sale date.
Is It Better to Sell or Let the House Go to Foreclosure?
If you have equity, selling is almost always better, because a foreclosure auction often brings a lower price and adds fees. Selling also avoids a foreclosure on your credit report.
Sources
- 12 CFR 1026.36 Prohibited Acts or Practices and Certain Requirements for Credit Secured by a Dwelling. Consumer Financial Protection Bureau. https://www.consumerfinance.gov/rules-policy/regulations/1026/36/
- Find a Housing Counselor. U.S. Department of Housing and Urban Development. https://apps.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
This page explains the general process and is not legal advice. Rules change and courts interpret them, so confirm with a real-estate attorney in your state before acting.