Selling a house that’s in pre-foreclosure can feel overwhelming, but you have more options than you might think — and if you act quickly, you can often avoid foreclosure entirely. Here’s a practical guide:
1. Understand Pre-Foreclosure
Pre-foreclosure begins after you’ve missed mortgage payments and the lender files a Notice of Default (NOD) or similar notice (name varies by state). At this point:
- You still legally own the home.
- You usually have a set window (often 90 days) to bring the mortgage current or work out another solution before foreclosure proceedings continue.
2. Communicate with Your Lender
Before you focus solely on selling:
- Call your lender and explain your situation.
- Ask about loss-mitigation options such as:
- Loan modification
- Repayment plan
- Forbearance
- Deed in lieu of foreclosure
- Many lenders prefer a solution that avoids foreclosure because it saves them time and money.
3. Consider Your Selling Options
If you choose to sell, you generally have two main paths:
Traditional Sale (Equity Sale)
If your home’s market value is higher than what you owe (including back payments, fees, and penalties):
- List your home with a real estate agent experienced in pre-foreclosures.
- Price it to sell quickly — time is critical.
- Proceeds from the sale will pay off your mortgage and any arrears, and you keep any extra equity.
Short Sale
If your home is worth less than you owe:
- Ask your lender to approve a short sale — selling for less than the loan balance.
- The lender agrees to forgive the remaining balance (sometimes partially).
- This process takes longer than a traditional sale, so start as soon as possible.
4. Gather Your Documents
To make a pre-foreclosure sale smooth, prepare:
- Recent mortgage statements (showing payoff amount)
- Documentation of missed payments and lender notices
- HOA documents (if applicable)
- Recent tax bills
- Home condition information (repairs, upgrades)
5. Move Quickly and Market Smart
- Hire a real estate agent who specializes in distressed sales.
- Focus on making the property as appealing as possible with minimal, cost-effective improvements.
- Be transparent with buyers about the timeline — they need to be ready for a fast closing.
6. Avoid Foreclosure Scams
Unfortunately, homeowners in pre-foreclosure are often targeted by scammers promising a “guaranteed save” or asking for upfront fees. Red flags include:
- Requests to sign over your deed
- Upfront cash for “foreclosure rescue”
- Pressure to stop talking to your lender
Always work with a licensed real estate agent, attorney, or HUD-approved housing counselor.
7. Plan for Next Steps
Selling quickly can help you:
- Avoid a foreclosure on your credit report (which stays for 7 years)
- Possibly walk away with cash (if you have equity)
- Have more control over your move-out date compared to being evicted post-foreclosure