Can I Sell My Home if It’s in Foreclosure?



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Regardless of how financially responsible you are, certain situations in life can make it challenging to stay current on your mortgage. In the unfortunate event that your home faces a foreclosure, you can sell it yourself instead of waiting for a foreclosure auction to take place. Here's what you need to know if you’re looking to sell your home before it gets sold in a foreclosure auction.

What’s the difference between Pre-foreclosure and Foreclosure?

Pre-foreclosure refers to the period after a lender has begun the foreclosure process, but the home still legally belongs to its owner. In Texas, pre-foreclosure starts when the lender sends a Notice of Default to the homeowner, informing them that they have 20–30 days to get current on their mortgage before the foreclosure process advances.

If the homeowner does not catch up with their mortgage payments before the end of the grace period, the lender gives them a Notice of Sale stating that the home will be sold in a foreclosure auction if action is not taken to prevent it before the date listed.

Ways to stop a foreclosure auction include negotiating a deal or modification with the lender, signing a deed in lieu, filing for bankruptcy, leveraging a government program, and selling the home.

What is the foreclosure timeline?

Unfortunately, the amount of time it takes for a lender to foreclose on a property is not always predictable. One homeowner may receive a foreclosure notice immediately after missing their third mortgage payment, while another may miss several more payments before they get a warning.

How long things take depends on how lenient the mortgage company is. While some lenders are willing to work with homeowners to help them solve their financial problems and avoid foreclosure, others are eager to streamline the foreclosure process as soon as they can take action.

Because the foreclosure timeline is not always straightforward, it’s best to expect the worst case and assume that you don’t have much time to prevent the auction. If you know you cannot afford your home, it’s best to look into selling it as soon as possible to maximize your profit and minimize the damage to your credit.

How can you sell your home during the foreclosure process?

Selling a home can be a hassle even in the best of situations, and a foreclosure only complicates matters more. Before putting the house on the market, it's essential to have a realistic idea of what's ahead of you. Here are is some information you should keep in mind when selling.

Everyone has to be on board.

If you are not the home's sole owner, selling can't be your decision alone. Many foreclosures result from divorce, and in this case, as long as both spouses own the property, both of them need to sign off on the sale. It doesn't matter how good or bad the relationship between you and the other owner(s) of your home is—to sell, everyone’s consent is legally required. If you are not on speaking terms, you may need to ask your lawyer to help you negotiate.

You can't change a home's value.

The whole point of selling a home in foreclosure is to pay off any outstanding debts with the profits of the sale, but that's not always possible. Buyers aren't going to pay more for a home than it is worth. Suppose the property's market value is less than the amount owed (plus foreclosure penalties and fees and any liens placed on the home). In that case, you won't be able to break even. Go into the sale with realistic expectations.

Time is of the essence

If you’re trying to sell your home before a foreclosure auction takes place, bear in mind that your lender will probably not wait for you. Mortgage companies are used to stalling tactics, including homeowners listing properties that they don't actually intend to sell in hopes of buying time. That means they are not likely to pause the foreclosure timeline while you attempt to sell.

Because selling is such a time-sensitive matter, your options will generally depend on how close your home's auction date is. If there is more than a month left until the auction, an agent with experience selling foreclosure homes can help you sell for its market value, provided that you are in a seller's market or at least a balanced market between buyers and sellers. However, if you are weeks or days away from the auction date, you may only be able to sell to a cash investor, likely for less than market value.

Why are some sales more complicated than others?

While selling a foreclosure home is rarely easy, some situations are especially challenging to deal with, namely homes with deceased owners and homes involved in lawsuits.

In the case of a home whose owner is no longer living, all heirs need to agree to a sale before it can take place. Affidavits of heirship may be required to prove who is legally entitled to make that decision. Also, note that if the home is in an estate currently being probated—especially if any portion of the estate division is being contested—there may be unexpected delays in the selling process.

If the home is tied up in litigation, such as a bankruptcy, there will typically be some extra hoops to jump through before selling. While the specifics vary from one legal battle to another, expect the process to be longer and more complicated than the average sale.

Denial doesn’t help.

One of the most common ways homeowners facing foreclosure sabotage themselves is by running away from their problems until it is too late. They falsely convince themselves that they can find a way to catch up with their mortgage payments, seek out methods to stall the foreclosure, or just ignore the issue altogether. Unfortunately, these coping mechanisms don’t fix anything—they only waste valuable time that could have been spent selling the house.

If you know that you can’t keep up with your mortgage payments, don’t try to trick yourself into believing everything is fine. The longer you take to acknowledge the reality that you need to sell, the smaller your pool of potential buyers will be, and the less likely you will make a good profit.

Don’t try to sell alone.

Whether you choose to sell on the traditional market or to an investor, it's crucial that you enlist someone well-versed in the foreclosure process to help you.

Selling a foreclosure home on the market is a process that has a lot of moving parts, so it’s imperative to work with a realtor who is proactive in making sure all of them are addressed in time.

Selling using an agent

Your realtor should also be an expert in choosing the perfect selling price that will allow you to close before any impending deadlines and net your best possible profit. We recommend Roots & Wings Realty Group in the Greater Houston Area to those looking for an experienced team who can close in a short timeline. Even if you’re outside the Greater Houston Area, consider reaching out to them for recommendations of similarly skilled agents in your area.

Selling to a cash house buyer

When selling to an investor, it’s crucial to perform a background check to ensure that they aren’t a scam artist and have proof of adequate funds to purchase the home, but that’s just the bare minimum. In the sale of a foreclosure home, the investor effectively takes on all the duties of a real estate agent and becomes responsible for making sure the sale operates smoothly. That’s why you need an investor who has bought foreclosure homes before and knows what to expect through every step of the process.

Get a free, no-obligation cash offer

If you’re looking for an investor in the United States who meets these criteria, look no further than AMI. We have plenty of experience buying foreclosure homes and can make you a no-obligation cash offer if you contact us today.

Rae Hoffman

Rae Hoffman is the owner of AMI House Buyers and a seasoned real estate investor with a heavy focus on the Houston & Katy, Texas areas. She has done numerous flips, has owned multiple rental properties, and is also a licensed real estate agent in the state of Texas. She is heavily experienced in the areas of foreclosures, water damaged properties, burnouts, and inherited properties, and works with distressed homeowners in all types of situations to help them understand their options and find potential solutions.


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