Buzz
Owning a home with a mortgage means that the word 'foreclosure' can be the most frightening one to hear—more terrifying even than termites. Foreclosure occurs when you fall behind on your loan payments, leading to the lender recovering their funds. This process can be prolonged and complicated; in Hawaii, for example, the average foreclosure takes nearly 7 years. However, homeowners often have more opportunities than they realize to fight, delay, or even stop a foreclosure.
When other options don’t work, the home may be sold at a sheriff’s auction, with the house being auctioned to the highest bidder to help the lender recover some of its losses. Typically, the law mandates a public notification process, informing both the homeowner and the general public about the upcoming sale. The notification period may last from a few days to several weeks, depending on local regulations.
If you've been unsuccessful in halting a foreclosure and your property is set for auction, you might feel like it's time to pack up and move on. However, even if your house is about to be auctioned, it’s not too late. Here are five potential strategies you can explore to prevent the sale and preserve your home.
Pay what you owe
Although it might seem improbable that you have the funds to settle your debt to your lender (especially since your home is in foreclosure), if you do manage to come up with the necessary money, you can usually stop the foreclosure process right up until the day of the auction by paying off your full debt—this includes any additional fees the lender may have added. This process is known as a mortgage reinstatement, and while it becomes more costly and complicated the closer you get to the auction, it’s often still possible, provided the home hasn’t been sold yet.
File for bankruptcy
Filing for Chapter 7 or Chapter 13 bankruptcy is effective in halting the foreclosure process at any stage, as the court typically issues an automatic stay, pausing the process immediately. Chapter 13 is generally the preferred option if you want to keep your home (rather than simply wiping out your debts). This can still be effective even if your house is already set for auction—but you must file the necessary paperwork and get the court's judgment before the auction date, and ensure that the sheriff’s department receives the order in time to remove your property from their listings.
Bankruptcy isn’t a permanent fix—the lender can eventually have the stay lifted—so treat any delays as a chance to take action. Use this time to address the situation by pursuing a loan modification or other possible solutions.
Take legal action against the lender
Foreclosures can follow one of two paths: Judicial, where the lender sues you and seeks a court order to initiate the process, and non-judicial, where the mortgage agreement allows the lender to bypass the courts and proceed independently.
If your foreclosure is non-judicial, the courts may be a viable option even if your property is set for auction (you likely can't file a suit if your foreclosure is judicial, since the court has already made its decision). This approach is only worth considering if you genuinely have grounds for a legal challenge; merely filing the suit will only temporarily delay the process. If you can't show that the lender made a significant error or violated any laws, this will probably not stop the auction.
Modify your existing mortgage
When dealing with foreclosure or the prospect of a sheriff’s sale, remember the key rule of mortgages: The bank is primarily interested in recovering its money and will always choose the most straightforward, secure method to do so. Foreclosure happens when they’ve decided you are no longer the easy or safe option. Applying for a loan modification—even at a late stage, after your house is already on the auction list—can halt the process completely. If successful, you can resume paying your mortgage as before.
This approach works because federal law prohibits lenders from proceeding with a foreclosure auction if a loss mitigation application is filed at least 37 days before the scheduled auction. The effectiveness of this method depends on how much time you have. For instance, if you receive an auction notice two months in advance, you can apply for mitigation, halting the process. If you can catch up on payments, negotiate a modification, or find another solution, the auction may be canceled, and your home could be saved.
Explore "Right of Redemption" laws
Even if you can’t prevent the auction of your home, you may still have a final option: The Right of Redemption. Not all states have redemption laws, but for those that do, there is a window of time after the auction during which homeowners can pay the full balance owed, plus any additional costs, and reclaim ownership. For instance, in New Jersey, there’s a 10-day period following an auction sale where you can contest the sale (and this period may be extended if you file for bankruptcy). In Philadelphia, the former owner has nine months to redeem the property, and the new owner can lose any money invested in the property if the original owner succeeds in redeeming it.
