Can You Sell Your House if You're Behind on Mortgage Payments in New Jersey?

Yes. You can sell your home in New Jersey while you're behind on your mortgage, and the loan, including what's past due, is paid off from the sale at closing. The earlier you start, the more time you have to sell well and the more of your equity you keep.

I'm Dennis Mark Interdonato with The Dennis Mark Group. A job change, a big repair bill, a payment that went up: payments get missed for all kinds of reasons, and it happens to homeowners across Monmouth and Ocean County who never expected it. If selling is one of your options, here's how it works and who can help, much of it at no cost.

How does selling pay off a mortgage you're behind on?

At closing, the settlement agent pays your lender the full payoff amount out of the sale. That figure is everything needed to pay the loan off on a given date. Federal rules require your servicer to send an accurate payoff statement within a reasonable time, and no more than seven business days after a written request, though a loan already in foreclosure can be an exception to that deadline (Regulation Z, 12 CFR 1026.36). Ask in writing, early.

If the price covers the payoff and your selling costs, what's left is yours. If it won't, your lender or servicer has to agree to any sale for less than the payoff, so talk with your servicer, a free HUD-approved housing counselor and an attorney first. A free home value tells you where you stand.

What does the foreclosure timeline look like in New Jersey?

Federal rules generally keep the legal foreclosure process from starting until you're at least 120 days behind (CFPB). New Jersey is a judicial foreclosure state, so the case goes through the court. According to the New Jersey Courts (NJ Courts, Foreclosure Self-Help):

1. The lender sends a Notice of Intent to Foreclose. It has to include the amount needed to cure, information about the foreclosure mediation program, and a statement that you can sell or transfer the property. You have 30 days from receiving it to pay or make other arrangements.
2. After that, the lender can file a foreclosure complaint, and you have 35 days to answer it.
3. Before asking for a default, the lender has to give you a final chance to cure, and the court guide describes a 45-day window after that.
4. If the debt isn't cured, the court enters a final judgment, and the county sheriff sells the property at auction.

Every one of those steps is a chance to act. How late in the process a sale can still close is a question for your attorney, and the answer is always better early. If a foreclosure has started and there's equity in the home, I can help you sell before the sheriff's sale, working alongside your attorney, your servicer and a HUD-approved housing counselor, but nobody can promise a closing before the sale date.

Who can help you for free?

• Your servicer. The CFPB says to call right away and be ready to explain why you can't pay, whether it's temporary, and your income and expenses (CFPB).
• A HUD-approved housing counselor. The CFPB says a counselor can explain the options your servicer offers and help at little or no cost. You can also call the HOPE Hotline at (888) 995-4673.
• New Jersey's own program. The New Jersey Housing and Mortgage Finance Agency offers free counseling to owner-occupants of one-to-four-unit homes who are in default or in danger of default, before any foreclosure is filed (NJHMFA).
• Court mediation. If a foreclosure case has been filed, NJHMFA says mediation generally has to be requested within 60 days after you're served with the summons and complaint. Mediation doesn't stop the case on its own (NJ Courts).

What options besides selling might be on the table?

The CFPB lists refinancing, a loan modification, a repayment plan, forbearance, a short sale, and a deed-in-lieu of foreclosure as options a servicer may offer. A counselor helps you sort out which ones fit. Selling is often the right call when the payment won't work even after help, and there's equity worth protecting.

How do you watch out for scams?

The CFPB says you don't have to pay anyone to help you avoid foreclosure, and it lists warning signs: being asked to pay up front, guarantees that your loan terms will change or that you won't lose the home, being asked to sign over the title or sign papers you don't understand, and being told to send your payment to someone other than your servicer. If an offer on your house shows up with pressure to sign today, have your attorney read it first.

How do I sell a home on this kind of timeline?

• Price it to sell in the first two weeks. Time is the one thing you can't buy back.
• Fix only what pays. I'm a former New Jersey home builder and residential remodeler. I'll tell you what a buyer's inspector will flag and what's worth doing before you list.
• Keep everyone on the same page. Your attorney and housing counselor get the same updates you do, at every milestone.
• No surprises. I tell people what they need to hear, not what they want to hear.

Frequently Asked Questions

Can I sell my house after the foreclosure has started in New Jersey?

The New Jersey Courts say the lender's Notice of Intent to Foreclose has to tell you that you can sell or transfer the property. How far into the case a sale can still close depends on your situation, so ask your attorney right away.

How do I find out my payoff amount?

Ask your servicer in writing. Federal rules require an accurate payoff statement within a reasonable time, and no more than seven business days after a written request, though a loan already in foreclosure can be an exception.

What does a housing counselor cost?

HUD-approved counseling is available at little or no cost, according to the CFPB, and New Jersey's NJHMFA counseling for homeowners in default or in danger of default is free.

What happens to the foreclosure case if I sell?

A closed sale that pays off the loan ends the debt the foreclosure is based on. Your attorney confirms how that's handled in your case.

This is general information, not legal, tax or lending advice. If you've been served with foreclosure papers, talk to an attorney and a HUD-approved housing counselor now.

About the author

Dennis Mark Interdonato is a REALTOR® and Master CDRE® who leads The Dennis Mark Group at Keller Williams Realty Ocean Living in Point Pleasant, NJ, helping buyers and sellers throughout New Jersey make their next move, with Monmouth and Ocean County as home base. Read more about Dennis Mark.

Keep reading

• How Dennis Mark plans a move around a life event
• Plan it step by step with the free Life Events Guide.
• Find out where your equity stands with a free home value.
• Free help first: what a HUD-approved housing counselor does before you sell.
• More on missed payments: what happens if you can't pay your mortgage.
• Have a question this didn't answer? Send it to Dennis Mark and it may become the next article.