Can you sell a house in foreclosure in North Carolina?

Yes, you can sell a house in foreclosure in North Carolina, but prompt action, thorough communication with the bank, and a knowledge of the foreclosure process is key. In this article we’ll cover what you need to know about the foreclosure process in North Carolina and the options you have to stop foreclosure before it’s too late.

Table of contents

We helped Brenda stop foreclosure within two days of her auction

1. Selling a house in foreclosure in North Carolina
2. What is foreclosure?
3. Consequences of foreclosure in North Carolina
4. The timeline of the foreclosure process in North Carolina
5. Can you sell a house in foreclosure in North Carolina?
6. How to sell a house in foreclosure in North Carolina
7. How long do you have to sell your house before losing your home to foreclosure in North Carolina?
8. How long does it take to sell a house in foreclosure in North Carolina?
9. When is it too late to stop foreclosure in North Carolina?
10. Tips for acting quickly when selling a house during foreclosure
11. Challenges when selling a home in foreclosure in North Carolina
12. What options do you have other than selling your home to stop foreclosure?
13. Common questions about selling a house in foreclosure in North Carolina
14. Conclusion: Can you sell a house in foreclosure in North Carolina?

Selling a house in foreclosure in North Carolina

Foreclosure can be a devastating and stressful situation for homeowners, especially if coupled with unfortunate life events such as job loss, divorce, medical bills, or the death of a loved one. When you default on your loan payments, your lender has the legal right to auction off your house to recoup their losses. This can result in not only losing your home but also having a negative impact on your credit that can last for years.

Although it may seem like there is nothing you can do to stop foreclosure, you actually have several options depending on where in the foreclosure process you are. In fact, it’s important to know that most banks and mortgage lenders will do everything they can to avoid foreclosing on your home because they actually lose money on foreclosure sales. So be sure to communicate with your mortgage lender to explore all of your options to avoid foreclosure. We will dive deeper into these options below including what you need to know to sell your house in foreclosure.

What is foreclosure?

Foreclosure is a legal process through which the lender, typically a bank, re-possesses a house from the borrower who has failed to meet their mortgage obligations. Once a house is foreclosed, the lender then sells the house (usually at auction) to recoup the property’s losses.

In North Carolina, foreclosures may occur via either judicial or non-judicial means. However, most residential property foreclosures in North Carolina are conducted through the non-judicial process. A non-judicial foreclosure is a highly efficient and cost-effective method for lenders to foreclose on properties eliminating the need for extensive legal proceedings. Unlike a judicial foreclosure, most North Carolina foreclosures do not involve court proceedings and can be carried out in accordance with the state’s foreclosure statutes.

Consequences of foreclosure in North Carolina

Home eviction from foreclosure

The bank will re-possess the home causing the borrow to lose the home and any equity they may have had in the home prior to foreclosure

Credit score damage from foreclosure

A foreclosure typically remains on your credit report for seven years causing obstacles when trying to qualify for a future loan

Deficiency balance

The amount owed to a creditor when collateral is sold for an amount that is less than what the borrower owes on a secured loan. So it is possible to actually still owe money after the bank has foreclosed on the home.

The timeline of the foreclosure process in North Carolina

In North Carolina, the foreclosure process generally spans approximately 120 days, commencing from the initial missed payment until the house is auctioned off. However, this timeline can fluctuate due to various factors, such as:

• The policies and protocols of the lender
• The foreclosure method employed
• The actions taken by the borrower throughout the proceedings

Here’s a general timeline of the foreclosure process in North Carolina:

Phase 1: First missed payment

Upon missing a payment, the lender typically dispatches a notice of default or a demand letter. This correspondence serves to alert you to the missed payment and the impending risk of foreclosure, while also providing a deadline by which you must rectify the situation and bring your account up to date.

Phase 2: Default

Following two missed payments, it’s probable that the lender will reach out to you via phone. Despite the delinquency, the lender might still be open to negotiating payment arrangements, possibly consolidating payments into a single sum rather than requiring several, to prevent further arrears. Subsequently, after three months of non-payment, the lender issues a demand letter, also known as a notice to accelerate, specifying the defaulted amount and granting the borrower a 30-day window to rectify the mortgage loan status.

Phase 3: Notice of default or foreclosure lawsuit

Following four consecutive months of missed payments, a notice of default (NOD) is dispatched. This formal announcement provides the borrower with a thirty-day window to settle the overdue payments before the foreclosure process initiates officially. Typically, lenders refrain from issuing a notification of default until the borrower has reached 90 days of delinquency (equivalent to three missed payments). Consequently, many borrowers may fall behind by a month or two without immediately facing foreclosure.

In a (less common) judicial foreclosure process, the lender initiates a foreclosure lawsuit. It’s imperative for the homeowner to promptly address this action, unless they’re willing to risk the judge granting a default judgment in favor of the lender. Following the homeowner’s response, the case proceeds to trial, during which the homeowner has the opportunity to seek legal counsel.

Phase 4: Notice of Sale

Phase 1-3 is commonly referred to as the pre-foreclosure process. Under federal law, the servicer generally cannot commence foreclosure proceedings until the borrower is more than 120 days overdue on payments, with some exceptions. It is during this stage that the house transitions from pre-foreclosure to foreclosure status. When the homeowner defaults on payments during the pre-foreclosure phase, the lender initiates the process by publishing a Notice of Sale, which the county records (also known as a notice of trustee’s sale). This notice specifies the auction’s date, time, and location, along with the minimum opening bid for the house. Typically, the period between the Notice of Sale and the foreclosure auction ranges from two to three months, though it often occurs sooner. Up until the auction date, the borrower still has the option to arrange payments or settle the outstanding amount, including any attorney fees incurred by the lender. However, this marks the final opportunity for the borrower to sell their house in order to stop the foreclosure process.

Phase 5: Auction

The lender is required, by law (N.C. Gen. Stat. § 45-21.17), to send you a notice of sale at least 20 days before the auction, and also post the notice in a public location and publish it in a newspaper for two consecutive weeks. The auction itself is open to the public, where the house is awarded to the highest bidder who meets all the necessary criteria. The lender or its representative establishes an initial bid, considering factors such as the outstanding loan amount, liens, unpaid taxes, and selling expenses. Once the highest bidder is determined and the transaction is finalized, the winning bidder receives a trustee’s deed upon sale, immediately assuming ownership and possession of the house.

Phase 6: Redemption Period

Certain states, including North Carolina, have legislation allowing foreclosed homeowners a period post-sale to reclaim the house. In North Carolina, this is referred to as the redemption period (or upset bid period). Following the foreclosure sale another individual can purchase the house by placing a higher bid than the one made during the initial sale, known as an “upset bid.” Initially, this period spans ten days following the filing of the sale report (N.C. Gen. Stat. § 45-21.20, § 45-21.27). With each new upset bid, a fresh 10-day upset bid period commences.

Phase 7: Eviction from home

If you, as the foreclosed homeowner, remain in the house following the foreclosure sale, the purchaser from the sale is required to issue you a notice to vacate before seeking an order for possession from the court clerk (N.C. Gen. Stat. § 45-21.29).

Phase 8: Deficiency judgment

When a bank or another entity holding the mortgage debt conducts a foreclosure sale, it’s common for the total amount owed by the borrower to exceed the sale price. This disparity between the mortgage debt and the sale proceeds is referred to as a “deficiency.” The deficiency is typically determined by the bid accepted at the foreclosure sale. In cases where a foreclosure sale results in a deficiency, North Carolina permits the foreclosing bank to pursue a personal judgment, known as a “deficiency judgment,” against the foreclosed borrower to recoup the shortfall. In North Carolina there are “anti-deficiency” laws in place that either prohibit or limit deficiency judgments under certain circumstances.

Can you sell a house in foreclosure in North Carolina?

Yes! Although there are many threatening circumstances when facing foreclosure, the good news is that you can still sell your house during the foreclosure process. However, it’s important to act quickly to due to the urgency imposed by the lender’s need for repayment. Selling your house prior to the foreclosure auction can:

How to sell a house in foreclosure in North Carolina

Step 1: Find out how much your home is worth

Depending on your real estate knowledge, timeline, and budget, there are several ways to determine your home’s value. You can hire an appraiser, speak with a realtor, or use online resources to help you estimate your property value.

Step 2: Set an asking price and timeline

After assessing the current market value of your home, the next step is to establish an asking price and list the house for sale. It’s best to set a fair asking price rather than overpricing to ensure a timely sale and attract sufficient potential buyers. Aim for a sell price that strikes a balance, enabling you to cover your debts while allow the buyer to be fully invested at or below the appraised value of the house.

Step 3: Inform your mortgage lender

Prior to listing the house, it’s crucial to notify your mortgage lender of your intention to sell the home during pre-foreclosure. This proactive step enables negotiation with the bank to address re-payment of any missed payments and extension the foreclosure timeline.

Step 4: Find a real estate agent or sell it on your own

Once you’ve informed your lender of your intentions to sell, you can seek the assistance of a reputable real estate agent or pursue a buyer independently. Given the urgency of the sale, we suggest engaging an experienced agent or considering a cash home buyer to expedite the process.

Step 5: Receive offer(s) and negotiate

Unfortunately, when your house is in foreclosure, negotiating room is often limited. With a tight timeline to sell and the prospect of an auction where you may not profit from the house, waiting is not advisable. We strongly suggest reaching out to several companies that buy homes to assess pricing and other considerations such as closing timelines, costs, and assistance with moving.

Step 6: Notify lender of buyer

Once contracted with a buyer to sell your house it is important to notify your lender. This can often delay the foreclosure process and allow you to pursue necessary steps to get the transaction to closing.

Step 7: Close

The final step in selling a house in foreclosure in North Carolina is to close on the house and transfer ownership to the buyer.

How long do you have to sell your house before losing your home to foreclosure in North Carolina?

In North Carolina, foreclosure proceedings can progress quickly, underscoring the importance of taking prompt action if you plan to sell. Usually initiated with a notice of default following three months of missed payments, the process can culminate in the property’s auction within six months. It is advisable to promptly explore all available avenues to sell your house and maintain open communication with your lender to prevent the loss of your home to foreclosure.

Challenges when selling a home in foreclosure in North Carolina

Selling a house in foreclosure can present many challenges. Many buyers can be skeptical when purchasing a house in foreclosure due to the as-is nature of these sales. It’s important to consider potential hurdles ahead of time to be prepared.

Owner no longer lives in home

If you no longer reside in the home, it’s imperative to notify potential buyers and make arrangements for showings or open houses. Additionally, it’s essential to maintain the property and ensure it’s in good condition to appeal to potential buyers.

Litigation pending

If the property is involved in legal proceedings such as bankruptcy, divorce or some other form of litigation involving liens against the house – this will likely impede the sales process.

Selling it on your own

If time permits, we recommend seeking the assistance of a licensed real estate agent to help you sell your house in foreclosure due to the complexities involved. However, for those seeking a swift sale without the hassle of repairs or concerns about closing costs, collaborating with a real estate investor who specializes in buying houses in foreclosure is encouraged.

What options do you have other than selling your home to stop foreclosure?

Bring your loan current

The simplest way to stop foreclosure is by bringing your loan current. This can be done by ordering a re-instatement fee from your mortgage lender which can include missed payments, interest accrued, late fees, and foreclosure attorney fees.

Loan modification

If financial restraints prevent a lump sum re-instatement of your loan, many borrowers choose to modify their loan. Your lender may be willing to extend the duration of your current loan, adjust the interest rate, defer certain portions of your payments, or provide alternative solutions to assist you in repaying the loan.

Request forbearance

Mortgage forbearance enables borrowers to temporarily halt or reduce their mortgage payments when facing a short-term crisis, such as unemployment, illness, or other financial setbacks. This was a common occurrence during covid-19. Be sure to check with your lender to see if you qualify for mortgage forbearance.

Refinancing before foreclosure

Refinancing is the act of replacing your current loan with a new loan with and can be utilized to prevent foreclosure.

Deed in lieu of foreclosure

This is typically a drastic measure, considered only when the home owner has explored all other avenues, whereby the borrower relinquishes ownership rights and transfers deed back to the lender, losing home ownership along with it.

Short sale

When a homeowner sells their house for an amount less than what is owed on the mortgage, the proceeds from the sale go entirely to the lender of the original mortgage. The lender may either forgive the remaining balance or pursue a deficiency judgment, compelling the original borrower to settle the outstanding debt. Although not as damaging as a foreclosure, The Fair Isaac Corp., which produces the widely used FICO score, says you could lose between 70 and 160 points off your credit score and could take up to 7 years to recover back to your original FICO score.

File for bankruptcy

Upon filing for either Chapter 13 or Chapter 7 bankruptcy, the court will issue an Order for Relief that includes an automatic stay provision. This automatic stay effectively halts creditors listed in your bankruptcy petition from pursuing collection actions on the debts owed to them.

Common questions about selling a house in foreclosure in North Carolina

Can I sell my house to avoid foreclosure in North Carolina?

Yes, it is possible to sell a house in pre-foreclosure. It’s important to act quickly and inform the bank your intention to sell and of any potential buyers to alleviate time constraints. The earlier you begin the process to sell the more time you will have to entertain offers and negotiate. Keep in mind that lenders are usually cooperative as a sale benefits them as well.

Will I still owe money when my house is sold at a foreclosure auction?

This depends on the outcome of the foreclosure auction sale and the outstanding mortgage balance. Sometimes, the auction sale fails to cover the entire mortgage debt, leaving you responsible for the shortfall owed to the lender, referred to as a deficiency judgment.

Can I sell my home in foreclosure to a cash home buyer?

Yes, in fact if you are facing time constraints, it is encouraged to seek out a reputable cash home buying company who has experience buying houses in foreclosure in North Carolina. This is by far the fastest and most convenient way to sell a house in foreclosure allowing you to sell the house in as little as 14 days.

Conclusion: Can you sell a house in foreclosure in North Carolina?

Selling a house in foreclosure in North Carolina can be stressful, but if action is taken early it can be a smooth process. Mortgage lenders have many options for borrowers who are in default and will try to provide assistance to avoid foreclosure. It is encouraged to seek professional guidance from an experienced real estate agent that understands the value of your house if you choose to sell on the open market.

These findings apply to all cities and towns in North Carolina, including Raleigh, Durham, Fayetteville, Johnston County, Sanford, Burlington, and surrounding areas.

Author: Jason Hill

I am a seasoned real estate agent and investor with years of experience helping my clients navigate the pre-foreclosure process in North Carolina in order to stop foreclosure. As the founder of Freedom Choice Realty & Investments my mission is to deliver simple and hassle free selling solutions to North Carolina homeowners. With the ability to either list your house or buy it as-is we have a unique offering that caters to those looking for ways to prevent foreclosure.