Pre-Foreclosure Sales in 2026: How Servicers Can Help Borrowers in Default and Shrink Delinquent Portfolios

Adapted from Xome’s sponsored feature in the August 2026 issue of MortgagePoint Magazine

Key takeaways

• Foreclosure completions rose 33% year over year in the first half of 2026, while properties foreclosed in Q2 2026 had been in the process an average of 563 days, the lowest level since 2013 (ATTOM, Mid-Year 2026 U.S. Foreclosure Market Report).

• When retention through modification or refinance is not viable, a pre-foreclosure equity sale or short sale is generally the next best outcome for both the borrower and the servicer.

• Across all Xome® Xpert Seller transactions closed from January 2021 through June 30, 2026: 58% of properties sold at or above list price, 45% closed within 30 days, 53% closed with positive homeowner equity retained, and more than $10 million in homeowner equity was preserved.

• Xpert Seller also serves homeowners selling for non-distress reasons, such as career moves, divorce, or retirement, as well as heirs who inherit property through a living trust or life estate deed.

• Moving resolution earlier keeps the servicer connected to the customer beyond the mortgage, creating recapture opportunities for future lending or servicing business.

What is a pre-foreclosure sale?

A pre-foreclosure sale is the sale of a home by a homeowner who is in default or at risk of default, completed before the foreclosure process concludes. It resolves the mortgage debt through an arm’s-length market transaction rather than a foreclosure sale, enabling an eligible homeowner to retain any remaining equity and potentially limiting the credit impact compared with a completed foreclosure.

For mortgage servicers, a pre-foreclosure sale shortens resolution timelines, expands disposition capacity, and limits the costs associated with foreclosure and REO.

Why foreclosure volume is creating urgency for servicers in 2026

Foreclosure activity is up, and it is not just foreclosure starts. In a stark turnaround, foreclosure completions increased 33% year over year in the first half of 2026, while properties foreclosed in the second quarter had been in the foreclosure process an average of 563 days, the lowest level since 2013.¹

More homes are entering foreclosure, and a much higher share are resulting in a completed foreclosure sale. For mortgage servicers, that combination creates a more urgent operational challenge and changes what effective loss mitigation requires.

Retention options should remain the priority whenever they can provide a sustainable path for the homeowner. When retention is no longer viable, a pre-foreclosure sale can maximize recovery and homeowner equity through an arm’s-length transaction.

What does a foreclosure sale cost a servicer?

Traditional loss mitigation processes require sufficient runway to conduct outreach, evaluate retention options, collect documentation, complete valuations, and determine the path toward a foreclosure sale. As timelines compress, delays become more costly. Servicers may face:

• Greater demands on already constrained teams

• Increased servicing and holding costs, legal fees, property preservation fees, and other expenses

• Higher risk of unrecovered costs

• More properties progressing into foreclosure and REO

• Recovery limited to the unpaid balance

How moving resolution earlier changes the outcome

A pre-foreclosure sale gives homeowners an alternative to foreclosure while helping servicers manage risk and disposition capacity.

The strongest programs do more than list a property. They combine homeowner outreach, property valuation, local agent support, broad marketing exposure, competitive buyer demand, negotiation assistance, debt-resolution coordination, and relocation support. This approach allows the servicer to begin resolution while the homeowner may still have equity, credit, and greater control over the transition.

How does the Xome Xpert Seller program work?

The Xome Xpert Seller program provides a guided pre-foreclosure sale process that helps servicers manage loss mitigation and disposition activities while allowing homeowners to sell quickly, potentially retain equity, and avoid foreclosure.

Homeowners receive support from a dedicated Xome Concierge® team and a local real estate agent. Properties gain exposure through Xome’s real estate marketplace, the MLS, and national real estate websites such as Zillow, Trulia, and Realtor.com², creating broader competition than a single off-market offer may provide.

The homeowner’s path follows four steps:

1. Referral: The homeowner contacts their mortgage servicer and asks about Xpert Seller.

2. Concierge match: The homeowner meets their Xome Concierge, who connects them with an experienced local agent.

3. Market and review: The property is marketed, and the agent presents all offers for the homeowner's review.

4. Close: Once an offer is accepted, the property is scheduled to close.

Homeowners can choose an auction or a non-auction path. Xome typically recommends a 45-day auction period; if no acceptable offers are received after three auction cycles, the property can transition to a traditional sale. Homeowners who prefer to skip the auction entirely can move directly to a traditional listing. Either way, the Xome Concierge team and a Xome-certified agent guide the homeowner through the process.

What results has the Xpert Seller program produced?

Results from the Xpert Seller program demonstrate how an earlier, competitive sale can produce meaningful outcomes.³

• 58% of properties sold at or above list price

• 45% of transactions closed within 30 days

• 53% of transactions closed with positive homeowner equity retained

• More than $10 million in total homeowner equity preserved through the Xpert Seller program

These results matter to servicers because a successful pre-foreclosure sale can reduce potential credit losses, shorten resolution timelines, expand disposition capacity, and limit the costs associated with foreclosure and REO.

They also reflect a homeowner experiences with Xpert Seller. Instead of progressing through foreclosure, eligible homeowners may leave with retained equity, relocation support, and a more graceful transition. That experience can also help mitigate reputational risk, protecting a servicer’s standing with borrowers and regulators.

Xpert Seller in action: a central Florida case study⁴

The challenge: A homeowner in central Florida, nearly 30 days behind on mortgage payments, decided to sell their property to avoid foreclosure.

The solution: The homeowner worked with a dedicated expert agent and the Xome Concierge team, who provided guidance throughout the selling process.

• List price: $650K

• Sale price: $645K (99% of list)

• Days on market: 24

• Net to seller: $6,781

• Debt resolution: 100%

Can Xpert Seller help homeowners who are not in default?

Yes. Xpert Seller can also support homeowners whose need to sell is driven by a life transition rather than financial hardship. Servicers can incorporate the program into recapture strategies for homeowners navigating a career move, divorce, retirement, or another change that makes selling the right next step.

Xpert Seller also helps heirs who inherit a property through a living trust or life estate deed to sell quickly, minimize the costs of continued ownership, and preserve equity.

By offering a supported path to sell across a wider range of homeowner needs, servicers can remain connected to customers beyond the mortgage, strengthen long-term relationships, and create opportunities to recapture future lending or servicing business.

A more proactive model for homeowner support

As foreclosure activity rises, programs that provide earlier, more personalized support can help homeowners navigate financial hardship, preserve available equity, and reduce the risk of foreclosure — while helping servicers improve recoveries, expand capacity, and manage portfolio risk.

“A graceful exit isn’t the end of a customer relationship; it can be the start of the next one. When we help someone through one of the hardest housing decisions of their life, they remember who was in their corner.” — Heather Adams, VP, Customer Experience, Xome

Xpert Seller gives servicers a broader way to support homeowners throughout the ownership lifecycle. By providing a guided, market-based path to sell, servicers can produce better homeowner outcomes, strengthen customer relationships, improve operational efficiency, and create opportunities to retain or recapture future business.

The market is creating greater urgency, but it is also creating an opportunity to redefine successful servicing. The servicers best positioned for the future will be those that act earlier, offer solutions tailored to the homeowner’s circumstances, and remain connected to customers beyond the mortgage.

Frequently asked questions about Xome Xpert Seller

For mortgage servicers

What is the Xome Xpert Seller program?

Xpert Seller is a guided pre-foreclosure sale program that helps servicers manage loss mitigation and disposition activities while allowing homeowners to sell quickly, potentially retain equity, and avoid foreclosure. It combines a dedicated concierge team, a local real estate agent, and exposure through Xome’s marketplace, the MLS, and national real estate websites.

How is Xpert Seller different from a traditional short sale?

A traditional short sale typically begins after significant delinquency and is limited to recovery of the unpaid balance. Xpert Seller is designed to start earlier than a traditional short sale, while the homeowner may still hold equity, and drives buyer competition through marketing and auction exposure. This competitiveness can push offers high enough to avoid a short sale entirely. Both equity sales and short sales are supported within the program.

Where does Xpert Seller fit in the loss mitigation waterfall?

Retention options such as modification or refinance should remain the priority whenever they provide a sustainable path for the homeowner. When retention is no longer viable, a pre-foreclosure equity or short sale is generally the next best option for both the borrower and the servicer, and Xpert Seller supports that step.

Who approves a short sale in the Xpert Seller program?

The servicer approves or rejects all short sales. Xome does not approve or reject short sales; Xome supports the transaction, coordinates the marketing and sale process, and can escalate to the servicer when needed.

What operational benefits does a pre-foreclosure sale deliver?

A successful pre-foreclosure sale can reduce potential credit losses, shorten resolution timelines, expand disposition capacity, and limit the costs associated with foreclosure and REO, including servicing and holding costs, legal fees, and property preservation expenses.

Can Xpert Seller be used for homeowners who are not delinquent?

Yes. Servicers can incorporate Xpert Seller into recapture strategies for homeowners selling because of a career move, divorce, retirement, or another life transition, and for heirs who inherit a property through a living trust or life estate deed.

How does Xpert Seller support customer retention and recapture?

By offering a supported path to sell across a wider range of homeowner needs, servicers remain connected to customers beyond the mortgage. That continuity strengthens long-term relationships and creates opportunities to recapture future lending or servicing business.

What results has the program delivered?

Across all Xpert Seller transactions closed from January 2021 through June 30, 2026: 58% of properties sold at or above list price, 45% closed within 30 days, 53% closed with positive homeowner equity retained, and more than $10 million in homeowner equity was preserved through the program.

For homeowners

Why would I sell my house before my forbearance ends?

Selling before your forbearance ends may allow you to keep any remaining equity, use a seamless sale process with a rebate of real estate fees to help with your next move, be proactive about your mortgage debt, and access a nationwide preferred real estate broker network.

What happens if I do not act before my forbearance plan ends?

If you take no action, you may be reported as delinquent to the credit bureaus, late fees may be assessed, and foreclosure proceedings may be initiated. Contact your mortgage servicer to review all available options, including options to keep your home.

How much does it cost me to use the auction platform?

You pay nothing for the Xome auction platform. An auction fee, called a buyer’s premium, is paid by the buyer and equals 2% of the winning bid amount. You will still have an agent commission, as with any real estate transaction. Where applicable, you may receive relocation assistance of 0.5% of the winning bid, paid at closing (not available in AK, AL, KS, MS, MO, or OR).

Why would a buyer agree to pay a 2% buyer’s premium?

Buyers on the platform understand the auction process, are interested in the properties available, and have demonstrated a willingness to factor the premium into their purchase decisions. All bidders receive applicable disclosures and agreements during registration.

Do I have to accept the highest bid?

No. You have the right to decline offers just as you would in a traditional sale. You will receive all offers and approve the one you want to move forward with.

How is the auction reserve price set?

Your listing agent will walk through a competitive market analysis with you to establish a list price. The reserve is then set as a percentage of that list price.

What if I receive an offer outside of the auction event?

Offers sometimes arrive outside of the online auction events. These are presented to you as pre-auction offers. If an offer is acceptable, you can approve it then, or you can wait for the competitive bidding once the auction goes live.

What if my home does not sell for enough to pay off my mortgage balance?

That situation is called a short sale. If that is the outcome, your mortgage servicer will provide more details on your best options at that point.

What is Xome.com?

Xome.com digitally connects buyers and sellers at every point in the real estate transaction. The Xome Offer Marketplace syndicates to thousands of real estate sites including Zillow, Trulia, and Realtor.com. Live online auctions run every week for four days, giving your property broad exposure and competitive bidding.

Who can benefit most from Xpert Seller?

Xpert Seller is particularly helpful for homeowners on a forbearance plan or a tight timeline, homeowners who want to preserve equity they have built, and heirs who have inherited a property and want to avoid prolonged ownership expenses.

What support do I receive during the sale?

You work with the Xome Concierge team along with a panel of expert local real estate agents, who provide personalized support and advice throughout the selling process — from listing through closing.

For real estate agents

What is Xpert Seller, and who are the sellers?

Xpert Seller is a program designed to help homeowners and heirs sell properties quickly and at a competitive price. It is especially beneficial for homeowners on a forbearance or tight timeline, homeowners who want to preserve their equity, and homeowners who have inherited properties.

Why do agents participate in Xpert Seller?

Participating agents gain exposure to a large network of highly qualified and motivated buyers, work with well-informed and motivated sellers guided by the Xome Concierge® team, sell properties in a fraction of the time compared with traditional methods, and gain access to other leads and auction properties.

How does the auction timeline work?

Xome typically recommends a 45-day auction period. If no acceptable offers are received after three auction cycles, the property can transition to a traditional sale. Sellers who prefer to skip the auction move directly from listing activities to a non-auction sale.

What is the referral fee structure?

Referral fees differ by transaction type, with separate structures for equity sales and short sales, and a cooperating broker fee may apply. Current terms are provided in your Xome panel agent agreement and transaction documentation.

Learn more

Learn more about how Xpert Seller can support your servicing strategy at xome.com/xpert-seller or contact [email protected]. For homeowner stories and a look at how the program started, read our Xpert Seller overview, Xome® Xpert Seller Pre-Foreclosure Solution.

About Xome

Xome is a leading online real estate marketplace and technology platform, offering comprehensive asset management and marketing strategies, and pre-foreclosure through waterfall disposition programs. Xome’s robust suite of property-level data and best-in-class auction platform demonstrates its commitment to innovation and continuous improvement. Learn more at xome.com.

Sources and disclosures

1. ATTOM, Mid-Year 2026 U.S. Foreclosure Market Report. Completed foreclosure change reflects first-half 2026 versus first-half 2025; average days in the foreclosure process reflects properties foreclosed in Q2 2026.

2. Listings may vary per local MLS rules and syndication.

3. Cumulative program-to-date results for all Xpert Seller transactions closed from inception (January 2021 through June 30, 2026). Percentages reflect share of closed transactions.

4. Case study results reflect a single completed transaction and are not a guarantee of future results. Individual outcomes vary based on property, market conditions, loan status, and homeowner circumstances.

This article is adapted from Xome’s sponsored feature in the August 2026 issue of MortgagePoint Magazine.