Can You Sell Your House If You’re Behind on Payments?

Falling behind on mortgage payments can be unsettling, raising concerns about losing your home. Selling your property is often a practical solution to avoid foreclosure and its long-term consequences. This approach allows you to regain control of your financial situation.

Assessing Your Financial and Mortgage Position

Understanding your financial standing and mortgage details is the first step. Determine the exact amount you owe, including your outstanding principal balance, missed payments, late fees, and other accrued charges. Obtain this figure from your mortgage servicer by requesting a detailed payoff statement.

Next, assess your home’s current market value to understand your equity. A real estate agent can conduct a comparative market analysis (CMA), estimating your property’s value by evaluating recent sales of similar homes in your area. Comparing this estimated market value to your total outstanding mortgage balance reveals if you have positive equity (worth more than you owe) or negative equity (owe more than worth). This assessment guides your sale options.

Understanding your state’s foreclosure timeline is also important. Federal law generally prevents the process from starting until you are at least 120 days delinquent, but the duration varies by state. Maintaining open communication with your lender provides clarity on your status and options. Consider your overall financial picture, including other debts, to inform your decision.

Exploring Your Sales Options

Once you have a clear understanding of your financial and mortgage position, you can explore the specific types of sales available, which largely depend on your home’s equity. If your home’s market value exceeds what you owe, including all mortgage arrears and estimated selling costs, you likely have sufficient equity for a traditional sale. In this scenario, the proceeds from the sale would first cover the outstanding mortgage, any late payments, and all associated selling expenses. Any remaining funds would then be disbursed to you.

For homeowners who find themselves “underwater” (meaning they owe more than the home is currently worth), a short sale may be a viable path. A short sale occurs when the mortgage lender agrees to accept a sale price that is less than the total amount owed on the mortgage loan to release their lien on the property. This option typically requires the homeowner to demonstrate financial hardship, proving they cannot afford to bring the mortgage current or pay the difference. The lender’s approval is a mandatory part of this process.

Both traditional sales and short sales, when conducted while a homeowner is behind on payments but before formal foreclosure, fall under the category of a “pre-foreclosure sale.” This term emphasizes the proactive nature of selling the property to resolve the mortgage delinquency and avoid the more severe consequences of a completed foreclosure. A pre-foreclosure sale aims to satisfy the outstanding debt and prevent the property from being repossessed by the lender through auction.

Navigating the Sale Process

To begin the sale of your home, particularly when facing mortgage arrears, engaging a real estate professional experienced in distressed properties or pre-foreclosure sales is a practical step. Such agents possess specialized knowledge of the complex legal and financial aspects involved, helping to guide you through the transaction. They can assist in accurately pricing the property and marketing it effectively to attract potential buyers.

Preparing your home for sale involves making necessary repairs, decluttering, and staging the property to enhance its appeal to prospective buyers. Once the home is ready, the agent will list and market the property, setting an appropriate price based on market conditions. As offers are received, your agent will help you review and negotiate the terms, working towards an acceptable purchase agreement.

Throughout the sale, especially if pursuing a short sale, consistent communication and cooperation with your lender are procedural requirements. This involves providing necessary documentation, such as a hardship letter and financial records, to obtain their approval for the sale. The lender’s negotiation of the sale price is a key part of the short sale process, as they ultimately determine whether to accept an offer. The closing process then involves home inspections, appraisals, and a title search to ensure clear ownership. At the closing, all documents are signed, funds are distributed to cover the mortgage payoff and selling costs, and ownership is legally transferred.