Florida Real Estate Law: How the Short Sale Process Works

A short sale is never a pleasant process. You’re losing your house. Not only that, but you’re dealing with a confusing process at a time when you’re emotionally drained anyway. If you or someone you know is facing a short sale, we hope we can help by shedding some light on the process. The specifics will vary depending on the lender and the details of the borrower’s financial situation, but this will give you a basic idea of what to expect:

First of all, if you’re going to sell your property in a short sale, the equity in your home must be less than what you owe on your mortgage. (Otherwise you could simply sell the home and pay off your mortgage.) Contact us if you’d like help making this determination.

To start the process, you’ll need to complete a stack of paperwork. To get the short sale approved, you need to show evidence of some kind of financial hardship: illness, unemployment, an increase in mortgage payments, business losses, etc. Being underwater on your mortgage isn’t considered enough of a hardship for short sale status.

You’ll want to work with a real estate attorney to create a short sale package. This package will contain information about your current financial situation, documentation supporting the short sale, and occasionally other information such as comparable sales in the neighborhood. In some cases, the lender requires a purchase agreement from a buyer before the lender reviews the package.

It usually takes a few weeks after the short sale package is submitted for it to be reviewed. After it’s reviewed it will be assigned to a bank negotiator who will evaluate the qualifications for a short sale. After the negotiator completes his or her review, evaluations will be ordered to determine the property value.

After the evaluation is complete, the file goes back to the bank negotiator, who determines if the current payoff amount is reasonable. The bank may request a higher payoff, requiring further negotiations. (You’ll want a real estate attorney to assist with this process!)

If a short sale is approved, the sale process proceeds just like any other property sale, including loan approvals and home inspections. Sometimes the paperwork requires that you still be responsible for certain percentage of the delinquent loan. This is less likely to happen than in a foreclosure—one of many reasons why a short sale is usually a much better choice than foreclosure.

This is a complicated process – there’s no doubt about it. If you’re considering a short sale, you probably have many questions about the ramifications for your credit and for your ability to buy a house in the future. We’re here to help you through this difficult time and to answer any questions that you may have. Give us a call at (305) 227-4030 to learn more.