What Has to Happen Before You Can Beat the Foreclosure Sale
Selling before foreclosure is possible, but there are several practical steps between deciding to sell and actually closing.
Estimate what the property can realistically sell for.
Determine what must be paid to the mortgage company and other lienholders.
Market the property and negotiate a contract that can realistically close in time.
The closing must occur before the foreclosure unless the sale is postponed or otherwise stopped.
Why might selling before foreclosure be better?
If a homeowner no longer wants to keep the property or cannot realistically afford the mortgage, selling before foreclosure may preserve more control over the situation. For a broader comparison of foreclosure options, see How Do I Stop a Foreclosure in Georgia?
The Consumer Financial Protection Bureau explains that when a home is worth more than what is owed, a normal sale can allow the homeowner to pay off the mortgage and selling costs and keep the remaining funds.
CFPB also notes that selling the home may be better for the homeowner's finances and credit than allowing the property to proceed through foreclosure.
How do I know whether I have enough equity to sell?
Start by comparing the likely sale price against everything that must be paid at closing.
Equity is not just “home value minus mortgage balance.”
A real closing may also need to pay accrued interest, foreclosure-related charges, other mortgages or liens, property taxes, HOA claims, commissions, attorney fees, and other closing costs.
The basic sale math
These are the major categories that determine whether a normal sale can close.
Is my mortgage statement balance the amount needed to sell?
Usually not.
A closing attorney generally needs a formal payoff statement from the mortgage servicer.
The payoff can include principal, accrued interest, late fees, advances, and other amounts permitted under the loan documents and applicable law.
The number shown on a monthly mortgage statement may not be the amount required to satisfy the loan at closing.
Do I need the mortgage company's permission to sell?
If the sale will pay the mortgage in full, homeowners generally do not need special permission simply to sell their property.
The closing process pays the mortgage from the sale proceeds and obtains a release of the lien.
CFPB explains that when the home is worth more than what is owed, a homeowner can sell the home and use the proceeds to pay the mortgage in full.
What if the home is worth less than what I owe?
That is where a short sale may come into the picture.
CFPB defines a short sale as a sale for less than the amount owed on the mortgage.
Unlike an ordinary sale that pays the mortgage in full, a short sale generally requires approval from the mortgage servicer or lender because the sale proceeds will not fully satisfy the debt.
Normal Sale vs. Short Sale
- Sale proceeds are sufficient to pay the mortgage payoff
- Other liens and closing costs can also be paid
- Lender generally does not need to approve the sale price
- Homeowner may keep remaining equity
- Sale proceeds are less than the mortgage balance
- Mortgage servicer approval is generally required
- Other lienholders may also need to approve
- Deficiency and tax consequences should be reviewed
Will a short sale eliminate the remaining mortgage balance?
Do not assume that it will.
CFPB warns borrowers to determine what will happen to any deficiency, which is the difference between the amount owed and the amount recovered through the sale.
If the lender agrees to waive the deficiency, CFPB recommends getting that waiver in writing and keeping it for your records.
Review the approval terms carefully. If the lender is agreeing to waive a remaining balance, make sure you understand exactly what the written agreement says.
What if there is a second mortgage or another lien?
Additional liens can complicate the closing.
A second mortgage, home-equity loan, tax lien, judgment lien, or other secured claim may need to be paid or otherwise resolved before the buyer can receive clear title.
CFPB specifically notes that a short sale involving multiple mortgages may require approval from the servicers of those other mortgages as well.
How much time do I need to sell before foreclosure?
There is no single safe number of days.
Selling real estate takes time. The property may need to be listed, shown, placed under contract, inspected, appraised, financed, title-checked, and closed.
If the sale date is already close, some of those steps may not be realistically completed before foreclosure. If the sale is already scheduled, see what options may still exist before the foreclosure sale .
The closer the foreclosure sale gets, the harder a normal sale becomes
Georgia's Attorney General explains that after a valid foreclosure sale, the winning bidder becomes the new owner of the property. That is why the homeowner's private sale needs to be completed before the foreclosure unless the pending sale has actually been stopped or postponed.
Does putting my home on the market stop foreclosure?
No.
Listing the house, signing with a real estate agent, or even receiving an offer does not by itself cancel the foreclosure sale.
Unless the mortgage holder postpones the foreclosure, the safest assumption is that the scheduled sale is still active until the mortgage is actually paid or the foreclosure is otherwise stopped.
Can the mortgage company postpone the foreclosure so I can close?
It may be possible, but do not assume the lender will agree.
If there is a legitimate pending sale, the homeowner or closing professionals may communicate with the mortgage servicer about the status of the foreclosure.
Any postponement should be confirmed rather than assumed.
Should I sell if I want to keep the house?
Selling is generally an exit strategy, not a way to keep the property.
If the homeowner's goal is to remain in the home, other options may need to be evaluated, such as loss mitigation, reinstatement, Chapter 13 bankruptcy, or another available solution. See our loan-modification guide and Chapter 13 foreclosure guide .
The right question is not simply “Can I sell?” but “What outcome am I trying to achieve?”
A homeowner may decide the mortgage is no longer affordable but still have substantial equity worth protecting. In that situation, selling before foreclosure can be very different financially from allowing the property to be sold at foreclosure.
What should I gather if I am thinking about selling?
Our foreclosure document checklist can help you organize the mortgage, lien, and sale-date information useful for reviewing the situation.
Helpful information to collect
What if the foreclosure sale is only days away?
Then the situation should be treated as urgent.
Even if selling ultimately makes sense, there may not be enough time to complete an ordinary real-estate closing before the sale.
Other foreclosure-stopping options may need to be evaluated at the same time rather than assuming the pending sale transaction will close quickly enough. If bankruptcy is also being considered, see our Chapter 13 timing guide .