Selling a House Facing Foreclosure: Your Options, Your Deadlines, and the Scams to Avoid

What should you do first if you are facing foreclosure?

Call your mortgage servicer and a HUD-approved housing counselor, in that order, this week. The counselor is free, works for you instead of the lender, and can tell you which options fit your situation before deadlines pass.

You can find one by calling HUD at 800-569-4287 or searching HUD's housing counseling list. The CFPB also points homeowners to these counselors at no cost.

Then gather the basics:

1. Your most recent mortgage statement and any letters from the servicer.
2. Your payoff amount and how much you are behind (ask the servicer for both in writing).
3. Any foreclosure notice with a sale date on it.
4. Proof of income and a simple list of monthly expenses.

Open every letter. Foreclosure notices have deadlines, and ignoring them is how people lose options they still had.

How much time do you have before a foreclosure sale?

Federal rules generally stop your servicer from starting the foreclosure process until you are more than 120 days behind on payments (12 CFR 1024.41(f)). After that, the timeline depends on your state, because foreclosure is governed by state law.

Some states also give owners a right to redeem the property for a period after the sale. Check your state's rules at /sell-my-house-for-cash and with a local attorney or counselor.

What are your options to stop or avoid foreclosure?

You have more options than most people realize, and some let you keep the house. The right one depends on whether you can afford the house going forward, how much equity you have, and how close the sale date is.

Bankruptcy is a serious legal step with long-term effects. If you are considering it, talk to a bankruptcy attorney. Many offer a free first consultation.

Fannie Mae and other loan owners have their own versions of the leave-the-house options, and some offer relocation help. See Fannie Mae's non-retention options and ask your servicer what your loan owner allows.

Should you sell your house before foreclosure?

If you have equity and cannot realistically afford to keep the house, selling before the foreclosure sale is usually the option that protects the most money. A foreclosure auction is not designed to get you a good price, and fees and interest keep adding to what you owe while you wait.

Example: you owe $180,000 including past-due payments and fees, and the house would sell for $260,000. A sale before the auction pays off the $180,000 at closing, then closing costs, and the rest comes to you. The longer you wait, the more fees and interest come out of that number.

A traditional listing usually gets a higher price but takes longer, and the clock matters here. A cash buyer can often close faster because there is no loan approval, but will usually pay less than a fully repaired house would get on the open market. Investors commonly use a rule of thumb of about 70 percent of after-repair value minus repairs. Run both paths through the cash offer calculator before you decide.

If you owe more than the house is worth, a cash buyer may not be able to help unless your lender approves a short sale. In that case, the counselor and your servicer are your first calls.

How do you sell a house fast when a foreclosure sale is scheduled?

Tell your servicer you are selling, get a written payoff quote, and pick a buyer who can close well before the sale date. If closing will be close to the deadline, ask the servicer in writing to postpone the sale and send proof of the signed contract.

Steps that keep the deal on track:

1. Get your payoff and the exact sale date in writing. Your buyer and title company need both.
2. Compare more than one offer. Cash Offer Desk can give you a written as-is cash offer in the areas where it buys, and it is free for sellers. If we plan to assign the contract to an investor partner, we tell you up front, in writing. We cannot promise a closing date before we know the details.
3. Ask each buyer for their realistic closing date and whether their earnest money is real and held by a title company or attorney.
4. Ask "Are you buying this house yourself, or assigning the contract?" A wholesaler who needs to find another buyer adds time you may not have. Learn more in our guide on wholesaling.
5. Close with a title company or real estate attorney who pays off your mortgage directly.

For timing details, see how fast a cash sale can close. If you also have tax liens or judgments, read about selling with liens or back taxes.

What foreclosure rescue scams should you watch for?

The most dangerous scam asks you to sign your deed over to a company that promises to save your house, let you rent it, and sell it back to you later. The CFPB warns that once you transfer the deed, you are not likely to get it back, and the scammer can sell the house and keep your equity.

Worse, the FTC notes that you still owe the mortgage even after you lose ownership. This scheme is sometimes called equity stripping or equity skimming.

Warning signs from the CFPB and FTC:

• They charge a fee before doing anything.
• They tell you to stop paying your mortgage or to stop talking to your lender.
• They tell you to make your mortgage payments to them instead of your servicer.
• They ask you to sign over your deed, or sign papers with blank spaces.
• They pressure you to act today, or promise to "guarantee" a stop to the foreclosure.
• They offer a "forensic audit" of your loan.
• They use government-looking logos or names.
• They want payment by wire, cashier's check or a payment app.

Under the FTC's Mortgage Assistance Relief Services rule, it is illegal for a company to charge you before it gets you a written offer from your lender and you accept it (FTC). Real government help never costs money. Our guide on spotting cash home buyer scams covers more red flags.

What is the difference between a real sale and a deed scam?

A real sale goes through a normal closing where your mortgage is paid off. A scam takes your deed but leaves your mortgage in your name.

If anything about a deal feels off, stop and call a HUD-approved counselor or a real estate attorney before you sign. Never sign a deed outside of a closing you understand.

What happens if the foreclosure sale goes through?

If the sale happens, you lose ownership and will need to move out under your state's eviction rules. If the house sold for more than you owed, you may be entitled to the surplus, but you usually have to claim it.

If it sold for less, some states let the lender pursue you for the difference, called a deficiency. Forgiven debt from a foreclosure or short sale can also have tax effects, explained in IRS Publication 4681. Talk to a real estate attorney and a tax professional about your specific case.

The earlier you act, the more choices you keep. If selling is the right path, you can request a cash offer or read how it works first.