What is a short sale?

A sale where the property is worth less than is owed against it, and the lender agrees to release their lien for less than the full balance so the transaction can close. The lender's agreement is what makes it possible, and it is theirs to give or refuse.

How long does a short sale take?

Longer than an ordinary sale, and it varies with the lender, the number of lienholders and how complete the file is. The most controllable factor is documentation: an organized package moves faster than an approval fought for piece by piece.

Will I still owe money afterwards?

That depends on whether the approval releases the deficiency or only the lien, and those are different things. Read the approval letter, or have a lawyer read it, before closing, because the leverage to negotiate it disappears once the sale completes.

Does a short sale hurt my credit?

It has a credit consequence, though it is generally regarded as less severe than a completed foreclosure. How it is reported can vary, which is another reason the terms of the approval are worth reading carefully.

Do I need a hardship?

Lenders generally require a documented one, meaning a real reason you cannot continue rather than a preference not to. Loss of income, illness, divorce, a death or an involuntary relocation are the usual grounds.

Can I sell to a family member?

No. Lenders require an arm's length transaction and they check. An arrangement that lets the seller keep the property or benefits a relative is fraud rather than a technicality, and it is the fastest way to lose an approval.

Who pays the agent in a short sale?

Commission is generally paid from the sale proceeds as part of what the lender approves, so it comes out of the transaction rather than out of your pocket. The approval letter sets out what the lender will allow.

Is a short sale better than foreclosure?

For most owners with no equity and a genuine hardship, yes, because it resolves the debt through a sale rather than through the courts and generally carries a lesser credit consequence. Whether it is achievable depends on the lender agreeing.

Can I choose the buyer in a short sale?

You accept an offer and submit it, but the lender approves or declines. That is why a buyer likely to wait matters more than a marginally higher offer that will walk away at week ten.

What if the lender counters the price?

It happens, and it means renegotiating with your buyer or finding another. A price supported by the lender's own valuation is less likely to be countered, which is part of why realistic pricing matters here.

Do I pay anything at closing?

Generally the approved costs come out of the proceeds rather than out of your pocket, and the approval letter sets out what the lender will allow. Contributions are sometimes requested, which is a term to understand before agreeing.

Short sales in Florida, and when they make sense

A short sale in Florida is what happens when a property is worth less than the loans against it and the lender agrees to release the mortgage for less than the full balance. It is slower and less certain than an ordinary sale, and for an owner with no equity and a genuine hardship it is frequently the best route available.

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What makes a sale short

The total owed exceeds what the property will sell for after costs, so the closing cannot pay everyone.

That means the sale cannot happen unless a lender agrees to take less than their full balance and release their lien anyway.

The decision belongs to the lender rather than to you or the buyer, which is the source of almost everything that makes the process frustrating.

Where there is more than one lender, each has to agree, and a second lender with little to gain has little incentive to move quickly.

Association liens, judgments and tax obligations all have to be resolved too, and each is another party who has to accept the arithmetic.

The first step is therefore not listing the property. It is establishing what is owed in total and what the property will realistically sell for.

What lenders want to see

A documented hardship, meaning a real reason you cannot continue: loss of income, illness, divorce, a death, a relocation you did not choose.

Financial documentation supporting it, which is generally extensive and which the lender will ask for again if it goes stale.

Evidence that the price is genuine, usually through their own valuation, since a lender accepting a loss wants to know the loss is the market's rather than a favor to someone.

An actual offer. Most lenders will not consider a short sale in the abstract, so the property is listed and marketed first and the package goes in when there is a contract.

An arm's length transaction, meaning the buyer is not a relative or an arrangement that lets the seller keep the property. Lenders check this and misrepresenting it is fraud rather than a technicality.

The process is document-heavy, and the single biggest cause of failure is a file that sits incomplete while the buyer loses patience.

The term that matters more than the price

Whether the lender releases you from the remaining balance, or only releases the lien on the property, is the most consequential term in the whole transaction.

A release of lien lets the sale close. A release of the deficiency means the shortfall is not still owed afterwards.

Those are not the same thing, and an approval letter can grant one without the other.

Read the approval letter, or have a lawyer read it, before closing. Once the sale completes, the leverage to negotiate this is gone.

Forgiven debt can carry tax consequences, which is a question for an accountant and one worth asking before the closing rather than at the following spring.

This is the point at which paying for an hour of professional advice most obviously pays for itself.

How it feels from the buyer's side

Buyers know a short sale can take months and may not be approved at all, so the pool is smaller than for an ordinary listing.

Buyers on a deadline generally will not participate, which removes a substantial part of the market.

The buyers who do participate expect a discount for the uncertainty and the wait, which is part of why short sale pricing sits where it does.

Buyer patience is the resource most likely to run out, and it is the reason a well-organized file matters more than a slightly higher offer.

The property is usually sold in its current condition, since a seller in this position is not funding repairs and the lender is not either.

Setting expectations honestly at the start keeps buyers in. Promising a quick approval loses them at week eight.

Alternatives worth comparing first

A loan modification, which keeps the property and changes the terms, and which suits an owner who wants to stay and can afford a reduced payment.

Renting the property, where the rent covers the obligation, which turns a problem into a holding position until values change.

Bringing cash to closing to cover the shortfall, which is unwelcome but simpler and faster than a short sale where the amount is modest.

A deed in lieu, which hands the property back without a sale and is generally worse for you than a short sale where a short sale is achievable.

Simply waiting, where the shortfall is small and the market is moving, since a property that is short today may not be in a year.

A short sale is the right answer often enough to be worth knowing about and not so often that it should be the first thing anyone reaches for.

Making one actually close

Establish the full picture first: payoff figures for every loan, association arrears, any judgments, and a realistic value.

Assemble the hardship documentation before listing rather than after an offer arrives, because that is what turns a three-month approval into a shorter one.

Price it to attract a buyer who will wait, which usually means pricing to the market rather than to what is owed.

Keep the buyer informed. Silence is what loses them, and there is generally something to report even when there is no decision.

Respond to lender requests the day they arrive. Files stall in the gap between a request and a reply far more often than they stall on a decision.

Expect it to take longer than anyone promises, and build the timeline into what you tell the buyer at the start rather than apologising for it later.

Choosing who handles it

Short sales are a specialist transaction and the difference between an agent who has closed several and one who has not is measured in months.

Ask directly how many they have completed, with which lenders, and what happened to the ones that did not close.

Ask how they organize the lender package, since the file's completeness is the single biggest determinant of how long approval takes.

Ask how they keep buyers engaged through the wait, because losing the buyer at week ten and starting again is the most common way these fail.

Some agents work with a negotiator who deals with the lender directly, which can help, and it is worth knowing who is actually doing that work.

Be wary of anyone promising a timeline. The lender controls it, and an agent who tells you otherwise is either inexperienced or managing you rather than the file.

This page explains how the market and the process handle this situation. It is not legal, tax or financial advice, and several of the questions here have real legal answers that depend on facts a web page cannot see. For anything involving a lender's legal process, a trust or an estate, speak to a Florida attorney. For anything about tax, speak to an accountant. We are glad to introduce you to either, and a valuation costs you nothing in the meantime.

Frequently Asked Questions

What is a short sale?: A sale where the property is worth less than is owed against it, and the lender agrees to release their lien for less than the full balance so the transaction can close. The lender's agreement is what makes it possible, and it is theirs to give or refuse.
How long does a short sale take?: Longer than an ordinary sale, and it varies with the lender, the number of lienholders and how complete the file is. The most controllable factor is documentation: an organized package moves faster than an approval fought for piece by piece.
Will I still owe money afterwards?: That depends on whether the approval releases the deficiency or only the lien, and those are different things. Read the approval letter, or have a lawyer read it, before closing, because the leverage to negotiate it disappears once the sale completes.
Does a short sale hurt my credit?: It has a credit consequence, though it is generally regarded as less severe than a completed foreclosure. How it is reported can vary, which is another reason the terms of the approval are worth reading carefully.
Do I need a hardship?: Lenders generally require a documented one, meaning a real reason you cannot continue rather than a preference not to. Loss of income, illness, divorce, a death or an involuntary relocation are the usual grounds.
Can I sell to a family member?: No. Lenders require an arm's length transaction and they check. An arrangement that lets the seller keep the property or benefits a relative is fraud rather than a technicality, and it is the fastest way to lose an approval.
Who pays the agent in a short sale?: Commission is generally paid from the sale proceeds as part of what the lender approves, so it comes out of the transaction rather than out of your pocket. The approval letter sets out what the lender will allow.
Is a short sale better than foreclosure?: For most owners with no equity and a genuine hardship, yes, because it resolves the debt through a sale rather than through the courts and generally carries a lesser credit consequence. Whether it is achievable depends on the lender agreeing.
Can I choose the buyer in a short sale?: You accept an offer and submit it, but the lender approves or declines. That is why a buyer likely to wait matters more than a marginally higher offer that will walk away at week ten.
What if the lender counters the price?: It happens, and it means renegotiating with your buyer or finding another. A price supported by the lender's own valuation is less likely to be countered, which is part of why realistic pricing matters here.
Do I pay anything at closing?: Generally the approved costs come out of the proceeds rather than out of your pocket, and the approval letter sets out what the lender will allow. Contributions are sometimes requested, which is a term to understand before agreeing.

Related Situations

Selling a house in foreclosure

Selling a house in foreclosure is usually possible and usually better than letting it complete. What the timeline allows, and who to talk to first.

Selling when you owe more than the house is worth

Selling a house that is underwater means covering the gap or getting lender approval. How to work out the real shortfall and what the options are.

Selling a house with title problems

Selling a house with title problems is usually a delay rather than a barrier. The defects that turn up in Florida searches and how each gets cleared.

From the Journal

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Short Sale Pros and Cons in Florida: How They Work and How Long They Take

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Short Sale, Deed in Lieu or Foreclosure in Florida: Credit Damage and How Soon You Can Buy Again

Home Buying Tips

Risks of Buying a Short Sale Home in South Florida

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