If you have a mortgage backlog and you don’t see an improvement, you may think that the only way out of this mess is to sell your home. Can I sell my house if it is in foreclosure?
What is exclusion?
Simply put, foreclosure occurs when you are unable to keep up with your mortgage payment and fall behind. Thanks to this, the lender can finally take over the house.
In some cases, you can voluntarily return the property to the lender. In other cases, you can try to keep ownership of the property as long as possible to bypass the default.
Can you sell the house if you have an outstanding mortgage?
Whether or not you can sell your home before foreclosure will depend primarily on whether your home is worth more or less than what you owe your mortgage.
If you have a loan arrears but you are not yet underwater – which means that the fair market value of your home is higher than what you owe your loan – you can sell your home and use the profits to pay off the lender.
If you choose this route, you will do the same as usual to sell the house: you will find an agent (here’s how to find a real estate agent in your area), accept the offer and fulfill any eventualities before closing the sale. You usually don’t need to get the lender’s permission to sell your home this way.
However, if your home is worth less than what you owe from your mortgage, you will have to sell your property as a short sale to avoid foreclosure. The caveat is that your bank must be on board this type of transaction.
House sale in foreclosure
It’s good to know that you’ll continue to own the home until the lender puts it up for auction. This gives you some time to find a buyer and pay off your mortgage before official closing. If you have started to have payment arrears, there are a few things you can do before putting your house up for sale:
- Ask for loan restructuring. If you start to run out of payments, it’s good to be active. Before you do anything, talk to your lender. Some lenders will agree to restructure the loan so that you can pay back the overdue payments over time.
- Ask for your understanding. If you have any short-term difficulties, such as losing your job, or have been waiting for an insurance claim, you can ask the lender for your understanding. If granted, the lender will agree to reduce or temporarily withhold payments when resolving these short-term problems.
- Eliminate other assets. If you have been in trouble, but you are sure that you will be able to get back on your feet and make payments for the house in the future, it may be wise to liquidate some other assets. Do you have a car that you can sell and use public transport for a while? Is there a family member who can offer you a loan in the meantime? Before you decide to sell your home, familiarize yourself with all available options.