Pre-Foreclosure in Brooklyn: How the Process Works and How to Sell Before the Auction

How It Works

The New York Foreclosure Process, Step by Step

New York is a judicial foreclosure state. A lender cannot simply schedule a sale; it has to file a lawsuit, prove its case and get a judgment from a judge. For a Brooklyn property that case is filed in Kings County Supreme Court. Knowing the stages tells you how much room you have.

• Missed payments and default letters. The servicer sends late notices and, under most mortgages, a notice of default giving you a period to cure.
• The 90-day notice. For most home loans, RPAPL 1304 requires a notice at least 90 days before the lawsuit, with a list of housing counseling agencies.
• Summons, complaint and notice of pendency. The lender starts the case and files a notice of pendency, often called a lis pendens, with the County Clerk. It appears in title searches and tells the world the property is in litigation.
• Help for Homeowners notice. RPAPL 1303 requires a plain-language notice titled Help for Homeowners in Foreclosure to be served with the papers in covered residential cases. Tenants in the building are also entitled to notice.
• Settlement conference. In covered cases the court holds a mandatory conference, discussed below.
• Judgment of foreclosure and sale. If the case is not resolved, the lender moves for judgment. A referee computes the amount due and the court authorizes a sale.
• Referee’s auction. The property is sold at a public auction run by a court-appointed referee, after public notice of the sale date.

Until the auction is completed, you own the property and can sell it or pay off the loan. Most owners who keep their equity act in the months before judgment, not in the final week.

Your Rights

Notices and Protections New York Gives Homeowners

Who Counts as a Homeowner Under These Rules

The strongest protections apply to a home loan as defined in RPAPL 1304: in general, a loan to an individual for personal or household purposes secured by a one- to four-family house or condominium unit that is used or intended as a residence. Co-op loans are handled differently. A loan to an LLC, or a commercial loan on a mixed-use or apartment building, usually falls outside the 90-day notice and settlement conference rules. If you own an investment building, assume the process will move faster and get counsel early.

The Mandatory Settlement Conference

Under CPLR 3408, in a residential foreclosure involving a home loan where the borrower lives in the property, the court must hold a settlement conference, generally within 60 days after the lender files proof of service. Both sides must negotiate in good faith, and the lender must bring its payment history, the amount needed to cure or pay off the loan, and information on loss mitigation options. The court can sanction a lender that does not negotiate in good faith, for example by tolling interest and fees. The court must also warn an owner who has not answered the complaint that defenses can be lost without an answer.

Free help exists. The housing counseling agencies listed on your 90-day notice and the New York Attorney General’s Homeowner Protection Program connect owners with nonprofit counselors and legal services at no cost. Use them before you sign anything with anyone, including us.

The Real Cost

Why Waiting Usually Shrinks Your Equity

The slow pace of New York foreclosures can feel like breathing room. But the payoff grows every month the case is pending, and that number is what any sale must cover first.

• Default interest and late charges under your loan documents, which may be higher than the original rate.
• The lender’s attorney fees and court costs, typically added to the payoff.
• Advances for taxes, water and insurance the servicer pays to protect its collateral.
• Property preservation costs if the property is vacant. New York’s vacant and abandoned property law can require lenders to inspect and maintain vacant homes in foreclosure, and those costs are generally charged back to the loan.
• Deterioration. Deferred repairs, open violations and a vacant or partly occupied building all reduce what buyers will pay.

At a referee’s auction the lender typically bids up to what it is owed, and outside bidders buy without inspections, which tends to depress prices. Surplus money above the debt and costs can belong to the former owner but must be claimed in court, after other lienholders. If the auction brings less than the debt, RPAPL 1371 lets the lender seek a deficiency judgment, limited by fair market value, if it moves within 90 days after the sale. A negotiated sale before the auction usually avoids all of that.

Selling

Selling a Brooklyn Property in Pre-Foreclosure

If You Have Equity

Order a written payoff statement from the servicer, good through a specific date. Your attorney will compare it to realistic sale prices, subtract transfer taxes, other liens and closing costs, and tell you what you would net. If the number is positive, a sale is often the cleanest exit: the buyer’s money pays the lender at closing and the rest is yours.

If You Are Underwater

A short sale requires the lender to approve the price and agree to release its mortgage for less than the payoff. Lenders want to see a hardship, a market-value price and a buyer who will actually close. Get the approval in writing and have your attorney confirm whether it fully satisfies the debt or leaves you exposed to a shortfall claim, and how any forgiven debt might be treated for tax purposes.

Practical Steps

• Hire a real estate attorney who handles foreclosure or distressed sales. In New York the seller’s attorney drafts the contract and handles the closing.
• Gather the summons, complaint, any judgment, the scheduled sale date and the servicer’s contact.
• Pull your Department of Finance and water account statements. Unpaid taxes and water charges must also be paid at closing; see our guide to selling with tax and water liens.
• If a sale date is set, ask your attorney about asking the lender to postpone it once you have a signed contract. Nothing guarantees a postponement.
• If tenants live in the building, a sale does not end their tenancies, and regulated tenants stay regulated; see selling with tenants in place.

Protect Yourself

Deed Theft, Equity Theft and the Home Equity Theft Prevention Act

A foreclosure filing is public. Within days, owners start getting letters, calls and knocks on the door. Some come from legitimate buyers. Others come from scammers who target long-held Brooklyn homes, especially those of older owners.

What HETPA Requires

New York’s Home Equity Theft Prevention Act, Real Property Law 265-a, protects owners of one- to four-family homes they live in when the home is in foreclosure, which the statute defines to include an active notice of pendency, a commenced foreclosure action, or a place on a property tax or utility lien sale list, and in some situations when the owner is two or more months behind. When an investor buys such a home, the contract must be in writing, in large bold type, fully completed, and must disclose the price, the buyer’s identity and any leaseback or buyback terms. As amended in 2023, the law gives the seller the right to cancel until midnight of the fourteenth business day after signing, and the buyer cannot record documents or take the deed during that period. Some older state guidance still describes a shorter period; your attorney can confirm the current rule.

Red Flags

• Anyone who promises to save your house for an upfront fee, or calls themselves a foreclosure consultant or advisor.
• A sale-leaseback or buy-back deal where you sign over the deed but keep living there and paying rent. State regulators strongly recommend against these.
• Pressure to sign today, blank spaces in documents, or papers you are told not to show a lawyer.
• Requests to sign a deed, power of attorney or quitclaim at a kitchen table instead of at an attorney-run closing.
• Offers where the buyer takes title but the mortgage stays in your name. A 2023 New York law treats a buyer in that situation as on notice of fraud unless the loan is formally assumed.

Protect your title: sign up for the Department of Finance’s free Notice of Recorded Document alerts, which email you when anything is recorded against your property. New York City created an Office of Deed Theft Prevention within the Department of Finance in 2026, and the state Attorney General and district attorneys have specific powers to pursue deed theft. Parts of Brooklyn are also designated cease and desist zones, where owners can register with the Department of State to stop real estate solicitation. A legitimate buyer will welcome your attorney and put every term in writing.

Investment Property

Pre-Foreclosure on Mixed-Use, Multifamily and LLC-Owned Buildings

Many Brooklyn buildings are owned through an LLC and financed with commercial loans: a mixed-use building on Fulton Street, a walk-up in Bushwick, a rent-stabilized six-family in Crown Heights. These loans usually do not get the 90-day notice or the mandatory settlement conference, and personal guarantees can put the owner’s other assets at risk.

• Receivers. Commercial lenders often ask the court to appoint a receiver to collect rents while the case is pending, so you can lose control well before any auction.
• Mezzanine and pledge loans. A lender holding a pledge of the LLC’s membership interests may be able to foreclose on them through a UCC sale, which can move far faster than a court case.
• Maturity defaults. Many owners are not behind at all; the loan simply matured and could not be refinanced, often because regulated rents no longer support the debt. See our guide to maturing loans you can’t refinance.
• Regulated rent rolls. Lenders and buyers underwrite rent-stabilized buildings on actual legal rents. See selling a rent-stabilized building and the rent freeze guide.

Options include a forbearance agreement, a discounted payoff, a note sale, or a sale of the building with the lender’s cooperation. A buyer who can close quickly is often what makes a discounted payoff possible.

Your Options

Fight, List or Sell Direct

Stay and Work It Out

If you want to keep the property and have the income to support a modified loan, use the settlement conference, a housing counselor and an attorney. Do not sell a home you can realistically save.

List With a Broker

If you have real equity, the property shows well, and there is time before a judgment, listing on the open market can bring the highest price. The risks are buyer financing, inspection retrades and a closing that slips past your sale date.

Sell Direct to Red Hook Development

Selling to us makes sense when time is short, the property needs work or has violations, tenants are in place, or a lender needs a buyer who will actually close. Our price reflects buying as-is with no financing contingency, so it may be below a retail price for a property in good condition. In exchange you get a written offer, no repairs, no showings and a closing date set around your deadline. If you live in the home and it is in foreclosure, our contract follows HETPA, including your cancellation right. We do not do leasebacks, buy-backs or deals that leave your mortgage in place.

How It Works

How We Buy Pre-Foreclosure Property

• Send the address and the sale date, if one is scheduled. We respond within one business day.
• We review the court docket, liens and municipal records ourselves.
• One walkthrough, with tenants in place if needed.
• Written cash offer showing how the lender’s payoff and other liens are handled at closing.
• Attorney-run contract and closing, with your own attorney involved from the start. No upfront fees, ever.

We buy across the borough, from East Brooklyn and Central Brooklyn to Southeast Brooklyn. Start with the quick form above or our detailed property form, and see everything we buy.

This guide is general information about New York law and process as of October 2026, not legal or tax advice. Foreclosure outcomes turn on your loan documents and court record, so speak with a New York foreclosure attorney or a nonprofit housing counselor before you decide.