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What is a Short Sale?

A short sale is an agreement of sale where the owner owes more money to the bank than the property is worth. Typically, the borrower (seller) can’t maintain mortgage payments, and the bank allows the property to be sold at a loss instead of going all the way through the foreclosure process. With a short sale, the consumer typically doesn’t have a foreclosure or a deficiency judgment. The consumer hopes to walk away with his credit mostly intact. Homeowners who are experiencing a financial hardship often turn to a short sale to avoid foreclosure or bankruptcy. On the other end of the spectrum, many investors are anxious to buy short sale properties because they are usually bargains. 


There are countless websites and books about “How To Do Short Sales” and “Investing in Real Estate.” In reality, there are good buys on short sales, but there may also be a high price to pay. The process of locating, buying a short sale, and working through the legal and emotional complications of a short sale is not for everyone.


What are the potential benefits of selling a home with a short sale?


There are many benefits to selling your house as a short sale. We have outlined a few of the main benefits of selling your house as a short sale. Depending on your own specific situation, the benefits can be significant and include and/or all of the following:

  • Eliminating any deficiencies on a first and/or second mortgage;

  • Working out an arrangement with the lender avoids any legal action later;

  • Avoiding a costly foreclosure and staying out of public record filings;

  • Selling at a short sale helps both homeowners and lenders get a fair price for the property and liquidate a declining asset;-Possibly avoiding bankruptcy;

  • Wrap up a bad investment with no loose ends or lingering liability.


What are the benefits of a short sale for a home buyer?


The are many great short sale opportunities for buyers in our current real estate market. However, many people mistakenly assume that the very status of a property as a “short sale” home listing makes it a bargain. This is a dangerous approach to real estate investing. The benefits of a short sale for a buyer are determined by the particular transaction, not a formula or universal criteria.


If you are interested in buying a short sale home, it could prove to be a lucrative and rewarding experience. This is especially true when you hire a professional to make sure that you avoid making the common mistakes that most investors make.


What are the challenges when buying a short sale home?


A short sale usually means that the home has decreased in value since the last sale, and maybe in a declining market.  Additionally, short sale homes are sold “as is” without any representations or warranties from the lender, so a thorough inspection is advisable. Further, it can take much longer to close a short sale transaction because the lender must approve all aspects of the deal.


When buying a short sale, or considering a short sale home, investors should be aware that lenders typically refuse to pay for common items such as:


  • Suggested repairs on a home from an inspection;

  • Pest control (even if it is determined the home has such problems);

  • Roof certifications or roof repairs;

  • Home protection plans;

  • Deferred maintenance; and

  • Seller assists.


What is the Short Sale Process in Pennsylvania?


A "short sale" purchase agreement is first reviewed with the sellers. In the case of multiple offers, the listing agent, along with any attorneys for the seller, will do their best to choose an offer to present to the lien holder(s). Price although a high priority, is NOT always the determining factor. The agreement for sale has the option of many contingencies in an attempt to protect the buyer. The seller’s advisers need to understand the possible effect these contingencies may have on the agreement to survive until settlement.


After the offer is accepted by the seller, both the seller and buyer will be required to submit financial information to the lienholder to help the bank evaluate the seller(s) situation. The lien holder will be very interested in the buyer’s ability to purchase the property and the buyer’s willingness to extend the time needed to complete this process. 

Each time a buyer gets frustrated and walks from their agreement, the process has to start over again for the seller and the new buyer. All new documentation is required even if a prior short sale was approved OR very close to being approved. This approval is NOT transferable even if the new offer is for more money.


Real Estate Agents & Short Sales


If you think a short sale might be right for you, it is critical you work with the right professionals. Real Estate Agents are paid only on short sales that actually close, which can create a terrible conflict of interest if closing the short sale would not be in the homeowner’s best interest. For instance, lenders frequently ask homeowners to sign a promissory note or specifically agree to liability after the transaction closes. Closing a short sale on these terms actually makes the homeowner worse off. Only a qualified real estate and short sale attorney can give you legal advice and fully represent your interests. Unfortunately, our office represents many homeowners in deficiency actions where the homeowner was not advised by his or her realtor that the bank was not releasing the deficiency onthe mortgage.


Consequently, it is very important to get legal advice from someone who is REALLY on your side. We represent you at NO cost and are paid directly by the bank and buyer in most situations.


Alex Tuttle has been recognized and rated as a Top Attorney and Distinguished Attorney in the area of Civil Litigation, as well as a Client Choice and Top Contributor by Avvo and regularly, represents clients in Bucks, Chester, Delaware, Montgomery, Lehigh, and Northampton Counties. If you are in need of any assistance or have any questions, please contact us to go over your situation. We would love the opportunity to help you and get your life back to normal. 

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Here at Tuttle Legal, our primary focus is you. In our office, we have represented 1000s of people through some of the toughest times in their lives in civil actions, mortgage foreclosure proceedings, and bankruptcy.  

It is our practice to provide you the most stress-free experience possible while going over your whole financial situation and providing you ALL the options available so you can make the best choice for you and your family. 



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What is a Short Sale?
Why Would I do a Short Sale?
What are the Challenges of Buying a Short Sale?
What is the Short Sale Process?
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