If you’re wondering, “Can I sell my home if it is in foreclosure?” you’ve likely missed several months of mortgage payments or may be already incurring the lender’s attorney fees for your continued delinquency.

Whatever stage you’re in, it’s natural to feel paralyzed with disappointment, sadness, and a sense of panic when those overdue notices and warnings come from your mortgage company. Your gut instinct may be to ignore the problem and let it fester, hoping it’ll just go away.

However, as the Department of Housing and Urban Development (HUD) mentions in its guidelines to avoiding foreclosure: “Foreclosure doesn’t happen overnight.” While death, divorce, medical bills, and job loss are all common reasons for foreclosure — another big one is denial.

“The best advice I can give to sellers facing foreclosure is don’t wait till the last minute. Don’t wait until your foreclosure is 30 days away from the sell date,” says Bethany Mendoza, top real estate agent in the Modesto, California area who’s helped clients navigate selling their home to avoid foreclosure.

“That’s what homeowners typically do because they’re in denial. That just puts you in a dire situation where you have to sell aggressively, which leaves money on the table.”

If you’ve exhausted your options for working out an alternative arrangement with your lender to stay in the property, then you need to act sooner than later to get the house sold — or prepare to face the ramifications of foreclosure.

First: When does foreclosure begin?

Foreclosure rules, processes, and timelines vary by state and among mortgage companies, but according to HUD, mortgage companies typically begin foreclosure three to six months after your first missed mortgage payment.

After about three months of missed payments, you’ll likely receive a Demand or Notice to Accelerate letter, informing you of how much you owe and providing 30 days notice to get your balance current. From there, it can be two to three months to the scheduled sale of your property if you take no action to square up with the mortgage company, HUD’s guidelines note.

Keep in mind that due to circumstances surrounding the coronavirus pandemic, the government has offered additional mortgage relief options through the CARES Act, including forbearance plans. Forbearance plans do not wipe out your mortgage debt but allow you to pause or reduce mortgage payments for a limited time period and repay what you owe at a later date.

I’m behind on my mortgage payments, but not yet in foreclosure. Can I still sell my home?

This pre-foreclosure period is actually the best time to sell. When you still have months left until the bank starts initiating foreclosure, you have time to prep your home for sale, so that it shows well and sells for the best possible price.

If you list too late in the foreclosure process, you won’t have time to prep the house, and you’ll have to list at a lower than market value price just to get it to sell in time to beat the foreclosure clock.

Don’t let any stigma keep you from making wise financial decisions about the sale of your home. You’re not alone in facing foreclosure. Even some homeowners of higher dollar homes have wound up in foreclosure:

“I had one foreclosure where the house was worth over half a million, and it went into foreclosure over a loan of $10,000. Unfortunately, that homeowner waited too long, and left me with just 60 days to sell it,” explains Bethany Mendoza.

“So, if you’re in financial trouble and facing foreclosure, don’t wait. Get your house on the market so you have the time to sell at a fair price.”

Are you allowed to sell after a foreclosure notice?

Even if your mortgage company has initiated the foreclosure process, you can still sell your home independently prior to your scheduled auction date. And if you’re facing long-term financial struggles, rather than a short-term loss of income, then selling your home could be your best option because your mortgage isn’t going to magically disappear.

What many homeowners don’t realize is that they have equity built up in their house that can help them out of their current financial difficulty. And as of this writing in 2020, home values are rising quickly as buyers desperately search for houses, putting seller’s in the driver’s seat.

“We have a huge inventory shortage in our area. We’re at a 1.2 months’ supply. So our inventory would have to quadruple, and our buyer demand would have to drop in half in order for home values to start going down,” explains Bethany Mendoza.

To start plotting your pre-foreclosure home sale, we recommend the following steps:

1. Find out roughly how much your home is worth.

Use an online tool like our Home Value Estimator to get a home value estimate in less than 2 minutes. We’ll pair housing market data with information that you tell us about your home so you can get a firm understanding of your home’s worth. (Note that you’ll use this number as a starting point and to run some preliminary math — but you’ll want an expert’s opinion before actually pricing your home.)

2. Account for what you owe on your mortgage, plus any late fees.

If you’ve received notice of foreclosure, you’ve likely missed several months of mortgage payments that you’ll need to satisfy with the lender, in addition to late fees which are typically charged 10-15 days after the first missed payment.

You may have also accrued fees from the mortgage company’s attorney for your delinquency. Look at your most recent foreclosure communications from the bank to determine what’s owed, including all outstanding principal and interest, and subtract it from your estimated sale price.

3. Subtract selling fees.

It costs money to sell a house. You’ll also need to factor in any fees for staging and preparing the house for sale, your real estate agent commission, closing fees, seller concessions, and moving costs.

Consult our guide on the fees associated with selling a house for a full rundown, and use our Net Proceeds Calculator to estimate your final payout. In the section where we ask: “How much is left on your mortgage?” — that’s a good place to input your outstanding mortgage balance, including any missed payments and late fees.

The goal here is to find out: If you were to sell your home, would it be enough to pay off your mortgage (and any associated fees), plus your regular closing costs and selling expenses?

With any luck, you’ll be in the black and even have some cash leftover to pocket. If your sale proceeds won’t cut it, the next question is whether you could bring money to the table to cover those costs. And if that’s not the case, then you’re probably looking at a short sale (which we’ll discuss more in depth further down).

4. Take your next steps with a qualified agent.

The steps we’ve recommended up to this point are back-of-the-napkin numbers you can run to estimate your financial position. But selling a house, especially with a potential foreclosure hanging over you, is no easy task.

Rather than face it alone, reach out to a real estate agent who’s well-versed in facilitating pre-foreclosure home sales. At HomeLight, we’re happy to help connect you with a few qualified agent candidates with the experience you need. Your agent can help you confirm your proceeds calculations with a seller’s net sheet and is there to help you prep, stage, list, and market your home for what you hope to be a quick sale.

5. Keep in close touch with your lender.

When in doubt, tell your lender what your plan is, even if it continues to evolve.

Keep in mind: Most lenders would rather work with you to get your house sold, rather than foreclose and sell your house at a loss.

“Here in California we have a Homeowners’ Bill of Rights. It states that if we have a legitimate offer on the table from a qualified buyer that we can prove to the bank, then the bank cannot foreclose,” explains Bethany’s husband and real estate partner, Tony Mendoza.

“Your lender is required to extend that escrow by 30 days, but that also means you’ll need to get your house sold within those 30 days.”

The bottom line is — unless home values drastically drop or demand in your area is uncharacteristically low — you can potentially sell your home for a profit before the bank forecloses. Do that, and you’ll be able to pay your mortgage in full and maybe walk away with some cash in hand to help you start over.

Can you stop foreclosure once it starts?

At any point in the foreclosure process before the actual day of foreclosure, you have the ability to work out an arrangement with your lender or pay them what they owe, according to HUD.

If you’ve gotten to the point where the lender’’s attorney is involved, you’ll likely need to cover those fees — in addition to your missed payments and late fees — to stop the foreclosure. Whether you bring that money to the table independently or by selling the home to unlock equity is up to you.

HUD recommends working with a Housing Counselor as soon as you miss a payment to advise you of all your options.

“Sellers can always call the bank to make arrangements to avoid foreclosure. Some homeowners will decide to do a deed in lieu of foreclosure, which is basically just giving the house back to the bank,” explains Bethany Mendoza.

“We don’t typically see that much right now because we’re in an equitable market, so you’d just be giving your equity to the bank along with the house. In fact, I haven’t seen any sellers in foreclosure that are upside down in their mortgages right now, so they’re all walking away with money by selling prior to foreclosure.”

How long does it take to sell a foreclosure home?

Selling a home facing foreclosure is typically no different than a traditional home sale.

Whether you’re facing a foreclosure or not, how long a home takes to sell is all about pricing and market conditions. But when foreclosure is in your future, then you need to price to sell.

“You don’t really want to mess around when you’re selling due to foreclosure. Since our inventories are low right now, traditional sellers are pushing home values a little bit pricing a little above market value, rather than at or below,” explains Bethany Mendoza.

“But you don’t have time to waste when you’re headed into foreclosure, so you need to price your home fairly yet competitively. If it’s priced right, it’s going to sell within a week or two.”

For example, let’s say like the home values in your neighborhood are between $300,000 and $315,000. When you’re up against the ticking clock of foreclosure, you’ll want to list your home closer to $300,000 so that it attracts more buyers and offers than other higher priced homes.

However, you don’t need to let the ticking clock of impending foreclosure force you into selling your house for a lot less than it’s worth. In fact, unless you’ve left your sale until too late in the foreclosure timeline, there’s no reason potential buyers need to know that you’re in a tight financial spot and facing foreclosure at all.

“The fact that you’re selling a home that’s in foreclosure is not something you want to advertise, and there’s no need to disclose that. We just want to get you as much money out of the property as possible,” says Bethany Mendoza.

“It’s only when you’ve waited too long and you’re facing a hard sell by date due to impending foreclosure that you may need to mention it to push things along a little faster.”

The good news is that most buyer’s agents are not going to pull up the tax records to see if a home is flagged for foreclosure — which means they’ll never know that they’ve found you in financial straits resulting in lowball offers.

So if you’ve listed early enough, you don’t need to rush the sale. You’ll only need to offer a steep discount to speed up the sale if you’ve waited too long to list.

What about pursuing a short sale?

Homeowners who are behind on payments, out of work, and upside down in their mortgages may be eligible to do a short sale instead of foreclosure. In a short sale, you’re essentially asking the bank to let you sell your house for less than you owe on it and requesting that they forgive any loan amount that you still owe beyond the amount gained from the sale of the home.

“Of course, you need to talk this all over with your tax account, but in most cases it is far better to do a short sale as far as the debt forgiveness and your credit report,” advises Bethany Mendoza. “When you short sell a house, it’s recorded on your credit as paid for less than or settled. Your credit will bounce back a lot faster with a short sale on your report rather than if the property is foreclosed on.”

A short sale isn’t exactly a cakewalk, though.

For starters, any forgiven debt is considered taxable income, and that’s not all:

“Short sales can take longer and will be more expensive if you are using an attorney,” explains Justin Meyer, a real estate attorney licensed in Florida, New York, and New Jersey.

“Everything will need to be negotiated with the bank, including any money that you are taking out of the sale, if there is any. Depending on the bank, it can be an easy process or a difficult one.”

Your lender can make things difficult because when you short sell you essentially have to requalify with the bank to prove that you can no longer afford the house on your current income.

You’ll need to show the bank your financial statements that show that your hours were cut, or that you have lost, say, 40% of your income, and therefore can’t make your mortgage payments. The bank reviews those financial statements to determine if you qualify for that debt forgiveness.

But you can get in serious trouble if your financial statements aren’t accurate.

“We had one individual that was hiding money and didn’t report it to the bank. They did get in trouble because they were not honest about their financials,” says Tony Mendoza.

What happens if your home is foreclosed on?