On June 3, 2014, Governor Malloy signed into law Public Act 14-84: An Act Concerning an Optional Method of Foreclosure. This new law creates a third option for those facing foreclosure: foreclosure by market sale. Traditionally a house going through foreclosure will either be transferred directly to the foreclosing party in cases where there is no equity in the property (strict foreclosure) or the property will be put up for sale at a foreclosure auction (foreclosure by sale). A foreclosure by market sale will allow for a realtor to list and sell the property in order to pay off the lender.
The new law gives the borrower the ability to sell their home in a more traditional manner by selecting a listing agent and listing the house for its fair market value. Foreclosure auctions tend to yield lower selling prices, so the market sale should ideally be a win-win for both borrower and lender. The market sale requires approval by the lender and the court, so in practice it will likely look and feel more like a “short sale”, where the lender agrees to a sale of the property, even though the lender’s net proceeds are less than what is owed.