How Does a Short Sale Work in Pennsylvania?

A short sale is when someone sells their home for less than they owe on the mortgage. This is not ideal, but it may alleviate significant debt. However, not everyone may go through a short sale, and you must prove that it is necessary for your situation.

Many homeowners pursue short sales because they are in financial distress and need to relieve debt quickly to avoid foreclosure or bankruptcy. If you do not mind selling your home, this can be a viable option. However, the lender may pursue a deficiency judgment and demand that you pay the balance on the mortgage. As such, we must accurately evaluate the property to obtain the maximum sale price.

Contact our Pennsylvania mortgage foreclosure defense lawyers at Young, Marr, Mallis & Associates for a free case review by calling (215) 701-6519.

Short Sales in Pennsylvania

A short sale is when a homeowner sells their home for less than the mortgage. Many homeowners may still owe money to the lender after the sale. This is not a great situation, but a short sale may help you avoid foreclosure.

Not just anyone may execute a short sale. You may only do so with the bank’s approval, and our mortgage foreclosure defense lawyers will help you prove to the bank why a short sale is necessary.

First, we must demonstrate your financial hardship with proof of your earnings. Pay stubs, tax returns, and bank statements may suffice. If you are unemployed, we may need to explain why. Perhaps you were suddenly laid off, and comparable work is unavailable. Maybe you are injured and can no longer work.

We also need a comparative market analysis showing that there is very little chance of selling the property for anything close to the mortgage value. Often, sellers still owe money on their mortgage after a short sale, and lenders may pursue deficiency judgments to recover the difference.

Why Homeowners Choose Short Sales

Homeowners often pursue short sales to avoid foreclosure, which has a much harsher impact on a person’s credit than a short sale. Homeowners may prefer a short sale because they plan to obtain a loan to buy a different, more affordable home. Foreclosure might damage their credit to the point that obtaining a home loan is not possible for a long time.

Economic conditions may also influence a homeowner’s decision to pursue a short sale. Changes in the neighborhood, job market, and overall economy may cause property values to plummet, making it harder for homeowners to afford mortgage payments.

Homeowners may choose to go through a short sale because the lender is unlikely to pursue a deficiency judgment. In some cases, lenders may declare the debt paid in full after a short sale, which is much better for your credit. If the lender indicates that they will pursue a deficiency judgment that you cannot afford, you may consider other options, like bankruptcy.

How an Attorney Can Help During a Short Sale in Pennsylvania

First, your attorney can help you prove to the bank that you need a short sale. Remember, you cannot enter a short sale just because you want to. You need the lender’s approval and evidence to support your case. An experienced attorney should know how to obtain a comparative market analysis and prove your financial hardship to the bank.

Second, your lawyer can help you convince the lender not to pursue a deficiency judgment. If the lender pursues a deficiency judgment, you must repay them the difference between the sale price of your house and what you owe on the mortgage. A lawyer may persuade the lender to take the money from the sale and let the rest go, especially if they can show there is almost no way you can pay.

Next, your lawyer should compare your legal options. While a short sale can help some homeowners, it is not for everyone. If your financial problems go beyond your mortgage, something like bankruptcy might be a better option.

Deciding Between Short Sales and Bankruptcy

Whether a short sale or bankruptcy is more helpful depends on your situation and what you want. Both may help alleviate significant debt, but they have different impacts on your credit and future financial options.

If you plan to buy a different home soon, a short sale might be a better option. Short sales tend to be easier on your credit, and you may be eligible for a new home loan in only a few short years. Alternatively, bankruptcy may remain on your credit history for 7 to 10 years, depending on which chapter you file.

If you have large debts other than your mortgage that you cannot afford, a short sale might not be as helpful as you think. While it might help you with your mortgage debt, you must still handle your other debts. Bankruptcy might be more effective at wiping out your debt, giving you a fresh start.

How to Prepare for a Short Sale in Pennsylvania

Begin preparing for a short sale by contacting a lawyer. Your attorney should help you gather important legal documents, including your mortgage and any communications you have had with the lender. You should also gather information necessary to establish financial hardship.

Next, prepare the property for sale. Is there anything you can do to improve the value? If possible, making repairs and improvements may increase your home’s value and get you a better sale price. Other factors, like neighborhood conditions and the overall economy, may be out of your control.

With your lawyer, contact the bank about a short sale. If they are open to the sale and are not interested in a deficiency judgment, your lawyer can help you move forward. If a deficiency judgment seems more likely, we may want to pause and reconsider your options.

Contact Our Pennsylvania Mortgage Foreclosure Defense Attorneys for Help

Contact our Philadelphia mortgage foreclosure defense lawyers at Young, Marr, Mallis & Associates for a free case review by calling (215) 701-6519.