Buying a Short Sale in Florida

How a short sale works from the buyer's side

The owner lists the house, you make an offer, and the owner signs it. At that point you have a contract with the owner, subject to the lender's approval. The listing agent then sends the lender a package: your contract, the owner's hardship letter, bank statements, tax returns, and a closing statement estimate. The lender orders its own valuation, usually a broker price opinion or an appraisal, and decides whether to accept, counter or decline.

In Florida the contract usually carries a short sale addendum. It says the deal depends on lender approval, sets how long you'll wait for it, and lets you cancel and get your deposit back if approval doesn't arrive by that date. Read that deadline carefully. Too short and you'll be extending it repeatedly. Too long and you're tied up while other houses sell.

Your deposit sits in escrow with the title company or a broker the whole time. You'll also sign an arm's-length affidavit, confirming you aren't related to or secretly working with the seller.

How long a Florida short sale takes

Timelines vary by lender and by how organized the listing agent is. A realistic range:

• Contract to complete package: one to three weeks if the seller already gathered their documents, longer if not.
• Lender review and valuation: four to eight weeks is common.
• Negotiation: the lender may counter with a higher price or ask the seller to contribute cash or sign a note. Add weeks for each round.
• Approval to closing: approval letters have expiration dates, often 30 days or so, so you must be ready to close quickly once it arrives.

Two lenders take longer than one. A second mortgage, a home equity line, or unpaid association dues all have to be settled, and each party wants a share. Ask at the start how many liens there are. A short sale with one lender and no association is the easiest kind.

Some delays are also scheduled. If the owner is already behind on payments, a foreclosure case may be open, and a sale date may be set. Lenders often postpone a foreclosure sale while a short sale is under review, but not always. Ask the listing agent whether a foreclosure case exists and whether a sale date is on the court docket. A short sale racing an auction date can disappear overnight, and your deposit is safe but your time is gone.

Short sale vs foreclosure vs bank-owned

These get mixed up, and they're very different purchases.

• Short sale: the owner still owns the house and sells it to you with the lender's permission. You can inspect, you can usually use a normal mortgage, and you get a normal closing with title insurance. The cost is time and uncertainty.
• Foreclosure auction: Florida forecloses through the courts, and the clerk of court runs the sale, mostly online. Bidders typically pay a deposit the day of the sale and the balance quickly, in cash, with no inspection inside the house. Liens and title issues are the bidder's problem to research.
• Bank-owned (REO): the house didn't sell at auction and the lender now owns it. It's listed like a normal sale, usually as is, with the bank's own addendum. Faster than a short sale, often with vacancy-related damage.

For most owner-occupant buyers, a short sale or bank-owned house is the realistic option. Auctions suit experienced cash buyers.

What to inspect and negotiate

Expect the house as is. The seller has no money for repairs, and the lender won't pay for them out of its loss. Your leverage is price, which the lender sets based on its own valuation, so a strong inspection report can help if the lender's valuation missed a problem.

• Insurance-related items: roof age, electrical panel, plumbing material and water heater age decide whether you can insure the house. A 4-point and wind mitigation inspection are worth ordering early.
• Deferred maintenance: owners in financial trouble often skip AC service, roof repairs and pest treatment. Budget for it.
• Permits: check the city or county permit history for open or expired permits. Those can block closing or become your problem after.
• Association balances: in a condo or HOA, unpaid dues and fees have to be resolved at closing. Ask for the estoppel certificate figures as early as possible.

Financing and timing risk

You can finance a short sale, but the loan has to stay ready for months. Rate locks expire, preapprovals go stale, and appraisals have shelf lives. Talk to your lender about a lock strategy that starts when the short sale approval arrives, not when you sign.

FHA and VA loans work if the house meets their property standards. Condos add a layer: the building's financial condition matters to lenders, and older Florida buildings facing milestone inspection repairs and full reserve funding can be harder to finance. Short sales are more common in condos for the same reason. With Florida condo values down 3.9% over the past year, some owners who bought recently can't sell for enough to pay off the loan and closing costs.

Keep looking while you wait. Many short sale buyers keep touring, and the contract usually allows you to cancel before lender approval if you find something else, as long as you follow the notice terms. Check that clause in your addendum.

A few seller-side issues that affect you

The seller's main concern is whether the lender will waive the deficiency, the gap between the payoff and what the lender receives. Florida allows lenders to pursue deficiencies, so sellers often negotiate a written waiver as part of the approval. If the lender won't waive it, the seller may stall or walk away. That's a real reason short sales fail late.

Tax treatment of forgiven debt is a seller issue too. It's not yours, but it can slow the seller's decisions. None of this is legal or tax advice for either side; the seller should have their own attorney or tax advisor.

For you, the takeaway is to work with a listing agent who has closed short sales before and to ask, before offering, whether the seller has already talked with the lender. A seller who has a short sale package in progress is a much better bet. If you'd rather not wait months, a shortlist mixing short sales with regular listings in the same area keeps your options open.