- Best for
- When the home is worth more than the loan balance plus the costs of selling.
- You keep the home
- No, but you keep the money left after the loan and selling costs are paid.
- Watch for
- Time, and anyone who asks you to sign over the deed while the loan stays in your name.
How it works
You sell the home, on your own or through a real estate agent, the mortgage is paid off in full from the sale, the costs of selling are paid, and you keep what remains. You do not need your servicer's approval to sell, though the CFPB says it can help to tell the servicer your plans.
This is different from a short sale, where the home sells for less than you owe and the lender has to approve.
Step 1: find out whether you have equity
- Equity is what the home is worth minus what you owe. Look at recent sales of similar homes nearby, or get an appraisal.
- Ask your servicer for a written payoff statement. A payoff amount is not your current balance: it includes interest through the payoff date and can include unpaid fees.
- The servicer generally must send an accurate payoff statement within seven business days of a written request. When the loan is already in foreclosure, the rule only says within a reasonable time, so ask early. A title company, lawyer or housing counselor can request it for you.
- If you have a second mortgage or other liens, they have to be paid from the sale too.
See what a payoff quote means, and use the free letter templates to ask for one.
Step 2: watch the clock
You have until the foreclosure sale to pay the loan off, so a sale of your own has to close before that date. If you have a signed sales contract, or can show the home is on the market, the FTC says the servicer might postpone the foreclosure. It does not have to. Ask in writing, send the contract, and get any postponement confirmed in writing by whoever is running the sale.
Keep your other options moving while the home is listed. You can still apply for help, and a complete application that reaches the servicer more than 37 days before the sale has federal protections. See a sale date is set.
Offers to be careful with
- A cash offer far below what similar homes sell for. The FTC describes buyers who use the pressure of a foreclosure to take a home's equity. Compare any offer with recent sales nearby before you sign.
- Any deal where you sign over the deed but the loan stays in your name. The FTC warns that transferring the deed does not transfer the mortgage: you still owe the payments, and the new owner controls the home. Your lender can also demand the whole balance when the home is transferred without its consent.
- An offer to buy the home and rent it back to you. The FTC warns that sale-leaseback deals can carry high fees and rent that rises, and you can be evicted if you cannot pay it.
- Pressure to sign today, or papers you do not understand. Take the contract to a lawyer or a HUD-approved housing counselor first.
A buyer should take over your loan only with the lender's written agreement, and you should get a written release from the loan as part of it. See how to spot a rescue scam.
Taxes on the sale
- If you owned the home and lived in it as your main home for at least two of the five years before the sale, up to $250,000 of gain is not taxed, or up to $500,000 on a joint return where both spouses meet the two-year living test.
- You generally cannot use this if you excluded gain on another home sale in the past two years.
- A loss on the sale of your main home is not deductible.
- If you receive a Form 1099-S, report the sale on your return even if none of the gain is taxed.
If the sale does not pay the loan in full and the lender forgives the rest, different rules apply. See taxes after foreclosure.
How much time do you have? It depends on your state.
See the foreclosure timeline, deadlines and free local help for the state where the home is.
Common questions
Can I sell after a foreclosure has started?
Yes, until the foreclosure sale happens. The sale of the home has to close and pay the loan off before then, including the foreclosure fees and costs added so far.
What if the offers are less than I owe?
Then it is a short sale, and every lender with a mortgage on the home has to approve. The CFPB advises asking the lender to waive any remaining balance and getting that in writing.
Who can check a sale contract for me?
Legal aid, a real estate lawyer, or a free HUD-approved housing counselor at (800) 569-4287. Your state's page lists legal aid and the bar referral service.
Other options to compare
- Repayment planYou keep paying your normal mortgage payment and add an extra amount each month until the missed payments are paid back.
- ForbearanceYour servicer agrees to accept reduced payments, or none, for a limited time. The missed amount is still owed and has to be dealt with when the pause ends.
- Payment deferral or partial claimThe missed payments are set aside as a balance with no interest and no monthly payment. It comes due when you sell, refinance or pay off the mortgage.
- Loan modificationYour servicer permanently changes the loan, usually by adding the missed payments to the balance and stretching the term or lowering the rate, so the payment is affordable.
- ReinstatementYou pay all the missed payments, late fees and foreclosure costs in one payment. The loan goes back to normal and the foreclosure ends.
- Short saleYou sell the home for less than the mortgage balance and the lender agrees to take the sale price. It avoids a foreclosure sale when keeping the home is not possible.
Sources
- CFPB: Avoid foreclosure
- FTC: Trouble paying your mortgage or facing foreclosure?
- HUD: Avoiding foreclosure
- 12 C.F.R. § 1026.36(c)(3), payoff statements (CFPB)
- CFPB: What is a payoff amount?
- CFPB: What is a short sale?
- FTC: Mortgage relief scams
- FTC consumer alert: offers to cash out your home equity through a sale-leaseback (October 2024)
- 12 U.S.C. § 1701j-3, due-on-sale clauses (govinfo)
- IRS Topic no. 701, Sale of your home
- IRS Publication 523, Selling Your Home
- 12 C.F.R. § 1024.41, loss mitigation procedures (eCFR)