Short sale realtor in Florida: selling when you owe more than the home is worth
A short sale is a sale your lender agrees to even though the price will not cover what you owe. Homeowners reach that point for ordinary reasons: a second mortgage, a job that ended, a divorce. Often it is a condo with an insurance increase or a special assessment nobody saw coming. We handle these listings across Palm Beach, Broward, Miami-Dade, Martin and St. Lucie counties. The first thing we do is check whether you actually need one. A good number of people who ask turn out to have equity. This page explains how lender approval works and what it costs you. It also covers how long it takes, and which alternatives are worth ruling out first.
Find Out Where You Actually Stand
Send the address and your approximate loan balance. We will come back with what the home would sell for today and whether a normal sale clears the payoff, which is a better outcome when it is available.
What a short sale is, in plain terms
Take the price a buyer will pay. Subtract the mortgage payoff, any second loan, past due property taxes, association dues, liens and the normal costs of closing. If that arithmetic leaves you short, a conventional sale cannot close unless somebody writes a cheque for the difference.
A short sale is the alternative. The lender agrees to release its lien and let the sale close, even though it takes less than the full balance. The approval is theirs to give, not yours, and it is not automatic.
So the sequence is different from an ordinary listing. You market the home, you get an offer, and then the offer goes to the lender for review. Only after they approve the terms does the sale proceed to closing.
That extra step is the whole reason these sales take longer and fall through more often. It is also why the agent's paperwork discipline matters more here than almost anywhere else.
Read next: when this route makes sense for a Florida seller · the lender approval process step by step
First, check whether you really need a short sale
This is the part we would ask you not to skip. Florida values have moved a great deal over the last few years. A fair number of owners who assume they owe more than the house is worth do not.
Three things commonly make people wrong about this. They remember what they paid rather than what the market is doing. They are looking at the original loan amount instead of the current balance, which years of payments have reduced. Or they are reading an automated estimate that does not know what the house looks like inside.
So we start with a real value and your current payoff figure, which your servicer will provide on request. If the two numbers leave anything over after costs, you have a normal sale. A normal sale is faster, more certain and better for your credit.
That check takes a day and costs nothing. It is worth doing before you commit to a route that needs somebody else's permission.
Read next: get a current value for your home · what owing more than the home is worth really means
What the lender wants to see
Lenders approve these sales because the alternative is usually worse for them, not as a favour. So the package you send has to make that case with documents rather than with a story.
Expect to provide a hardship letter explaining what changed. Then recent pay stubs or proof of income, bank statements, tax returns, a monthly budget and the listing agreement. Then comes the offer itself, the buyer's proof of funds or loan approval, and a settlement statement showing exactly where every dollar goes.
The lender also orders its own valuation. If their number comes back above your contract price, they will push back. The way through that is evidence about condition and comparable sales rather than argument.
Every servicer runs a slightly different process, and the file is reviewed by people who have hundreds of others. Complete submissions get decided. Incomplete ones get requested again, and each round trip costs weeks.
Read next: what to do when payments are already behind · the full range of options before foreclosure
What a short sale costs you as the seller
You normally do not bring money to the table, and you normally do not leave with any either. The approval letter sets what the lender will allow to be paid from the proceeds. That typically covers the usual closing costs and the commission.
That last point surprises people, so it is worth saying plainly. In most of these transactions the commission is paid out of the lender's proceeds rather than by you. Anyone telling you that you must pay an agent out of pocket to do this should be asked to show you where.
The real costs are elsewhere. One is time, because the approval stage adds weeks or months. Another is credit. A short sale appears on your record, and the effect is real, although it is generally considered less damaging than a completed foreclosure.
The third is the deficiency, which is the balance left unpaid. Whether the lender can pursue you for it afterwards depends on the approval terms and on Florida law. It is the single most important thing to have an attorney read before you sign.
Read next: the costs that come out of any Florida closing · see what a normal closing costs a seller
How long a short sale takes, and why offers fall apart
An ordinary Florida sale moves from contract to closing on a schedule everybody can see. Here the clock belongs to the servicer. It varies from one lender to the next, and from one file to the next.
So the main risk is not finding a buyer. It is keeping the one you found. Buyers get tired of waiting, their financing approval expires, and the ones who were only mildly interested walk away first.
Two things help. The first is telling buyers up front what they are getting into. A buyer who understood the timeline before making the offer is far more likely to still be there at the end. The second is submitting a complete file the first time.
A second mortgage makes everything harder, since both lenders have to agree and the second has less to gain. Mortgage insurance can add another approval. We will tell you how many parties have to say yes before you list, rather than discovering it halfway through.
Read next: selling when the loan is larger than the value · when speed matters more than price
The alternatives to a short sale worth ruling out first
This is not the only route out, and it is not always the best one. A loan modification changes the terms of your existing loan so the payment becomes affordable. That is the better answer if you want to keep the house.
A repayment plan or forbearance can bridge a temporary gap. A deed in lieu hands the property to the lender and ends the matter, usually without the marketing and the buyer. Refinancing works if you have equity and the credit to qualify. That is exactly what the first section of this page is checking.
If you have equity and simply need out, a conventional sale is better in every respect. Faster, more certain, nobody else to ask, and no deficiency to negotiate.
And if the house is already in foreclosure, timing drives everything. A sale can often still happen, but the window narrows as the case advances. That is the point at which to stop reading and make a call.
Read next: how a loan modification works · selling a home already in foreclosure
Condos, rentals and second homes
South Florida has a particular version of this problem, and it is the condo. Insurance costs and structural assessments have risen sharply in some buildings. A large enough assessment can put an owner underwater on a unit that was comfortable two years ago.
That changes the analysis. A buyer is pricing the assessment as well as the unit. Lenders are increasingly cautious about certain buildings, and the association finances become part of the sale. We will look at the estoppel and the building's position, not just the unit.
Lenders and the tax code treat investment property differently from a primary residence. A hardship case is also harder to make on a rental. It is still possible. It is simply a different conversation.
If the property is tenant-occupied, the lease complicates showings and the approval. Tell us at the start, because the lease runs with the property and the sale does not cancel it.
Read next: selling a tenant-occupied rental property · what South Florida condo buyers are paying now
What we do, and what we will not promise
We value the home honestly and tell you which category you are in. If a normal sale works, we will say so and stop talking about anything else. If it does not, we market the property, qualify buyers for patience as well as for money, assemble the lender package and manage the approval.
We will not promise the lender will approve. Nobody can, and an agent who does is telling you something they do not know. We will also not advise you to stop paying your mortgage to qualify. That advice costs people their options, and it is not ours to give.
What we will do is tell you where you stand before you commit to anything. We keep you informed through a process that otherwise feels like silence. And we point you to an attorney for the parts that need one.
If the answer is that you have equity after all, that is a good day and it costs you nothing to find out.
Read next: compare every way to sell a home · weigh selling against refinancing
Where to start today
Call your servicer and ask for a current payoff figure. That is the balance plus interest and fees, rather than the number on your last statement. Then ask us for a value. Those two numbers decide everything that follows.
At the same time, open every letter from the lender, even the ones you do not want to read. Dates in those letters matter, and missing one closes doors that were open.
If you are behind, a free housing counsellor is genuinely worth an hour. They do not sell anything, and they will walk through the modification and hardship routes that an agent is not qualified to advise on.
Then come back to us with the numbers and we will tell you plainly which route fits. We would rather give somebody an honest answer than take a listing that cannot close.
Read next: what to do when a modification is turned down · what a listing agent is responsible for
Where to get help that is not us
Housing counselling approved by the US Department of Housing and Urban Development is free, and the counsellors have no product to sell you. If you are behind on payments or weighing a modification, that hour is worth more than anything an agent can tell you.
Find a HUD-approved housing counsellorThis page explains how these sales work in Florida. It is not legal, tax, credit or financial advice. Whether a lender can pursue you for the unpaid balance, and how the forgiven amount is treated for tax, depend on your approval terms and your circumstances. Speak to a Florida real estate attorney before signing an approval letter, and to an accountant about tax. We are glad to introduce you to either, and a valuation costs nothing in the meantime.
Where We Sell
Help for underwater sellers near you
Values, condo insurance costs and assessments vary street by street here. These pages cover what listing a home looks like in the places we sell every week.
Frequently Asked Questions
- What is a short sale?
- It is a sale where the lender agrees to release its lien for less than the full amount owed. You market the home normally. Once you have an offer, the lender reviews the price and the costs and decides whether to accept it. Their approval is required, and it is not guaranteed.
- Do I have to be behind on my mortgage?
- Not necessarily. Lenders generally want evidence of hardship rather than missed payments specifically, and some will consider a file where payments are current. Do not stop paying in order to qualify. That advice circulates widely, it narrows your options, and no agent should be giving it.
- Who pays the real estate commission?
- In most short sales it comes from the proceeds as part of what the lender approves, not out of the seller pocket. The approval letter sets what will be allowed. If anyone tells you that you must pay an agent directly to handle this, ask them to show you where that comes from.
- Will I still owe money afterwards?
- That is the deficiency question, and it depends on the terms of the lender's approval and on Florida law. Some approvals release you from the balance and some do not. It is the most important part of the paperwork, and it should be read by a Florida attorney before you sign anything.
- How long does the process take?
- Longer than an ordinary sale, and the variation is wide because the timeline belongs to the servicer. A complete, well-documented submission gets decided far faster than one that has to be requested again. Two mortgages, or mortgage insurance, add parties and add time.
- How does it affect my credit compared with foreclosure?
- There is a real effect, and anyone who tells you otherwise is selling something. It is generally regarded as less damaging than a completed foreclosure, and how it is reported varies. A housing counsellor or a credit professional can give you a better answer for your own file than an agent can.
- Can I do this if the house is already in foreclosure?
- Often yes, and the window narrows as the case moves forward. Timing is the whole issue here, so if a case has been filed, make the call now rather than after reading further. We will tell you quickly whether there is still room to work with.
- What if I have a second mortgage or a HELOC?
- Then both lenders have to agree. The second lien holder has less to gain from approving, which makes it the harder conversation. It is still done regularly. We will establish how many parties need to say yes before you list rather than discovering it halfway through.
- Can I sell an underwater rental or a condo this way?
- Yes, though the analysis differs. Lenders treat investment property differently from a primary residence, and a hardship case on a rental is harder to make. South Florida condos have their own version of the problem. An assessment or an insurance increase can push an owner under water on a unit that was fine before.
- Is there any better option?
- Frequently. If you have equity, an ordinary sale is faster, more certain and needs nobody's permission. If you want to keep the house, a modification or a repayment plan is the better path. We check for equity first, and when a normal sale works we say so and stop there.
Other Reasons People Sell
Divorce real estate agent in Florida: selling the marital home
Selling the marital home: timing, valuation, net proceeds and what happens when one spouse will not sign.
Probate real estate agent in Florida: selling an inherited house
Selling an inherited or estate property: who can sign, what it is worth, selling as it stands and multiple heirs.
FRBO: renting out your own property, and when to sell it instead
Renting out your own property, and selling a rental when it stops making sense, with or without a tenant in place.
Work out your numbers
What is my home worth?
A valuation built from closed sales in your own community, with the comparables named.
Estimate your net proceeds
Work the commission, documentary stamps and closing costs against your own number.
Current market reports
Prices, days on market and inventory for the counties we cover, updated monthly.
How we list a home
What we do between the listing agreement and the closing table, phase by phase.
Talk It Through
Check for equity before you assume the worst
Onias Derilus is a licensed Florida broker. A current value and a straight read on your position cost nothing, and a good number of the people who ask us about this turn out not to need it.
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