What Is a Short Sale in Real Estate in Florida?

Foreclosures and short sales in South Florida are on the rise.
Foreclosures and short sales in South Florida are on the rise. (Image: Jupiterimages/Photos.com/Getty Images)

As of 2007, the housing market in Florida has been suffering due to increases in foreclosures and the decline of home prices. Areas in South Florida have a large inventory of vacant homes and homebuilding has declined throughout the state. Homebuyers find themselves with many options when looking for a home in Florida. Foreclosures, new homes and short sales are prevalent. Of the options available to homebuyers, short sales offer many advantages that are beneficial to buyers.

What Is a Short Sale?

The housing market is experiencing a sharp decline in the market value of homes. Owners who bought homes at the height of Florida's housing boom in 2005 discover that their homes are declining in value. Many people find that their mortgages are higher than the actual value of the home. If they choose to sell their home at the market value instead of the mortgage value, they will be short selling their home. At the end of the fourth quarter in 2010, short sales accounted for a large percentage of home sales in Florida, nearly 30 percent. Homeowners sometimes elect to have a short sale in lieu of a foreclosure in an effort to protect their credit rating. Short sales in Florida require the approval of the lender and can take many months to complete.

Florida Short Sales

At the end of 2010, nearly one in seven homes in Florida was vacant, according to the American Public Media Marketplace site. The state is experiencing an increase in the number of short sales, but unfortunately, some of those sales may slip into foreclosure while awaiting bank approval. New legislation being introduced in the state legislation is attempting to shorten the amount of time that it takes to obtain lender approval. U.S. Representative Tom Rooney is proposing a 45-day time frame for lenders to review short sale documentation and respond with an answer.

Why Buy a Short Sale?

Unlike foreclosures, which typically involve a lender reclaiming a home and then the home remaining vacant, short sales are better for the neighborhood. In a short sale, the owner is still living in the home and performing maintenance and upkeep. The owner can also answer any questions regarding the house or neighborhood that the future buyer may have. The buyer in a short sale is often able to obtain a home in a desirable neighborhood at the market value or sometimes slightly less. It may take some time to complete the sale due to the need for bank approval, so it is sometimes a good idea to keep looking while waiting for approval just in case the offer is denied.


Florida is a deficiency judgment state. This means that the lender can sue you to collect the balance between the short sale price and the outstanding amount of the loan. Although this event is rare, the lender does have a number of years in which they can seek retribution, so some lenders will wait until your circumstances improve before trying to collect. To avoid this happening, it is best to work with a real estate attorney when negotiating a short sale. The attorney can work with the lender to ensure that the lender accepts the short sale price as payment in full. This will protect you from a deficiency judgment later.

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