Pros and Cons of Short Sale in Florida

When a homeowner is behind on their mortgage payments and is facing the risk of foreclosure, one feasible option is to convince the lender to perform a short sale. A short sale may be a viable alternative to avoiding foreclosure. Defaulting borrowers who owe more money than their property is worth may find a short sale to be the best solution. 

However, it is crucial to assess each situation individually, as some homeowners in situations of temporary distress may be able to modify their loan and keep their property. Our legal experts at Marina Title can help to explain the different options to you.

What is a Short Sale? – The Basics 

In essence, a short sale is a loss mitigation strategy used to avoid foreclosure. Usually, it occurs when the owner of a mortgaged property needs to sell a property for less than the amount owed on the mortgage. 

The property typically will have to be listed for sale before a short sale offer may be accepted. The homeowner must also show evidence of financial hardship (e.g., loss of employment or income, divorce, etc.). The lender will usually order an appraisal to ensure that the short sale offer is fair. Once the lender accepts the short sale offer, the transaction can proceed to closing just like a standard sale. 

Upon the closing, the lender receives all the proceeds from the sale to settle the mortgage debt (minus any fees and commissions to be paid out at closing). Some lenders will also give the homeowner a relocation or other type of incentive to enter into a short sale, typically in the amount of $1,500 to $10,000. The lender should also sign a document stating that they will not pursue the difference of what they are owed from the homeowner (which is called the “deficiency”).

As expected, the lender loses money in the short sale process. Yet, short selling a property is often a better option for lenders compared to the time and money required to see a judicial foreclosure through to the end. 

The Pros and Cons of a Short Sale in Florida – An Overview 

As debt keeps accruing further and lenders start sending notifications, distressed homeowners must consider their alternatives to foreclosure. However, fully eliminating debt in a situation of financial distress may not be feasible. In this situation, a short sale allows borrowers to stop struggling with high mortgage payments and set their sights on new and better possibilities. 

Additionally, a short sale permits defaulting borrowers to stop foreclosure. Usually, the foreclosure process begins when a lender files a lis pendens and a complaint in court. Florida is a judicial foreclosure state, so no lender can foreclose a property without court authorization. This process can take time, which is why many lenders are amenable to a short sale instead.

While defaulting borrowers may not receive any of funds upon a short sale (other than a possible relocation incentive), they do not have to pay closing costs or commissions to sell the property. 

Another benefit of a short sale is that if the loan is in default, the homeowner will often be able to save their credit a lot quicker than if the property goes into foreclosure. A defaulting borrower who accepts a short sale offer may only have to wait two to three years before being able to purchase another home.

Although a short sale is usually a shorter process than foreclosing on a mortgaged property, it may still take several months to complete. Lenders require several documents to approve a short sale and the short sale package must be prepared correctly and completely. Short sales may also have tax consequences – it is always best to speak to an accountant before you accept a short sale offer. Furthermore, like any real estate transaction, short sale requires professional expertise to ensure that all regulations and contractual obligations are complied with.

Is a Short Sale Right for You? Contract Marina Title to Find Out

Owned and operated by experienced real estate attorneys, Marina Title is a premier title company that offers title, escrow, and closing services throughout Florida. Our expert legal advisors can review your case to determine whether a short sale is the best choice for you. If so, we will be with you every step of the way to help ensure your rights are protected.

If you are facing financial distress with your property and are considering a short sale as a possible way to avoid foreclosure, contact us today at (305) 901-5628 or email us at Info@marinatitle.com to schedule a free consultation.