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Short Sales and Foreclosures

A Florida short sale is when the lender agrees to buy back a property from borrower, for less than what you still owe on the property.

It is an alternative to foreclosure for homeowners who can no longer afford their mortgage, or it can also be used if your property is “under water”, meaning it is worth less now than the amount you borrowed from the bank.

In most cases, the lender, as part of the negotiated sale, will release you from paying the deficiency, which is the different between the short sale price and the original mortgage amount. However, that is not an automatic, and you must consider that before agreeing to a short sale

Advantages of a Florida short sale?

A short sale, while still doing damage to your credit, will ultimately do far less harm than a foreclosure would.  A foreclosure will show up in public records and can lower your credit score from anywhere from 175-300 points.  A short sale will turn up as “settled for less than the full amount” or similar language on a credit report, but it is not public record and as such won’t be known to employers or anyone looking at your credit history. Any late mortgage payments will also show up on your credit history. If you do a short sale, and the rest of your credit history is good, your score might go down by only 50 or 60 points.

There are financial incentives for homeowners as well. There are additional fees and costs to both the borrower and lenders which are mitigated when doing a short sale.  In addition, many banks are offering their own financial incentives to do sell your home via short sale, anywhere from 1,000 to 35,000 dollars depending on the institution.

HAFA (Home Affordable Foreclosure Alternative) is a government-sponsored short sale which is an option if you qualify. In addition to receiving $3,000 to help you relocate into more affordable housing, a HAFA short sale guarantees no deficiency judgements, no closing costs and no promissory notes.  In addition there are additional incentives for second mortgages, including up to $6,000 at closing

So how do I qualify?

Bottom line, you must be proactive and not wait until foreclosure notices are sent to your home before you start asking about a short sale. Contact your lender and ask them about their conditions for a short sale. You must meet all their requirements and deadlines in order to have a successful short sale.

But it can be done and we’ll help you navigate through the short sale process and get you in to a home you can afford.

As of 2011, Florida laws and industry standards fare in an ongoing and rapid state of change. Borrowers interested in pursuing a short sale should consult first with a HUD approved mortgage counselor for up-to-date and specific advice as it applies to their situation. Also, borrowers need to obtain up to date information from multiple professionals, including an accountant, an attorney, and a real estate broker.

For more information on Florida short sales, check out Roy Oppenheim’s interview on How to do a Florida Short Sale.