Short Sale Explained in 3 Minutes: A Quick Overview for Florida Homeowners

What is a short sale — the real definition 0:00 If you're dealing with a property that 0:01 doesn't make financial sense anymore, 0:03 whether it's the payments, condition, or 0:05 life situation, you may have heard of 0:07 the term short sale. In this video, I'm 0:09 going to explain what a short sale 0:11 actually is and what it's not and when 0:13 it may or may not make sense. A short 0:15 sale is when the property is sold for 0:17 less than what's owed on it and the 0:19 lender agrees to those terms. And that's 0:21 a crucial piece. This is lender approved 0:23 and it's not something that the seller 0:24 can just decide to do on their own. A 0:26 short sale is not a foreclosure. 0:28 Foreclosure is forced. A short sale is 0:30 negotiated. It's a negotiated settlement 0:32 and the lender decides the outcome. For 0:33 a short sale to even be considered, 0:35 three things have to line up. Number 0:37 one, financial position. You owe more on 0:39 the property than it can realistically 0:41 be sold for. Number two, a legitimate 0:44 hardship. You have to prove a real Short sale vs foreclosure — the critical difference 0:46 financial hardship such as job loss, 0:49 divorce, medical issues, and/or income 0:51 reduction, and that must be documented. 0:53 Number three, lender approval. Nothing 0:55 happens without the lender approval. And 0:57 the approval comes in writing. That's an 0:59 approval letter with specific terms. And 1:02 this is where most people underestimate 1:03 the process. A short sale isn't one 1:05 decision. It's multiple departments and 1:08 components. Loss mitigation, 1:09 underwriting, investors, sometimes 1:12 mortgage insurance, and they don't 1:13 always communicate. And that's why short The 3 things that must line up for lender consideration 1:15 sales take time. Typically 3 to 6 1:17 months, sometimes longer. Documents 1:19 expire, financials have to be files get 1:21 resubmitted. It's a process, not a 1:23 single event. lender accepts a short 1:25 sale, they issue an approval letter and 1:27 that letter controls everything. It may 1:29 include a required net amount, a closing 1:32 deadline, and whether the remaining 1:34 balance is forgiven or not. And any and 1:36 if any of those terms aren't met, you 1:38 may have to start all over again. Here's 1:39 what sellers need to understand very 1:41 clearly, the deficiency. The lender may 1:45 forgive the remaining balance or they 1:47 may pursue a deficiency judgment. 1:49 Nothing is final until it's in writing. 1:51 Taxing. If the debt is forgiven, it may 1:53 be considered taxable income. You you 1:56 need to speak to a tax professional on 1:57 that. In short sales, the seller does 1:59 not receive proceeds. However, sometimes Why short sales involve multiple departments and take time 2:02 the lenders may offer relocation 2:03 assistance. That's not guaranteed, but 2:05 it is possible. Not all short sales are 2:07 the same. FHA, VA, and conventional 2:10 loans, they all have different rules, 2:12 timelines, and processes that affects 2:14 how the deal is structured from the 2:16 start. So, when does a short sale 2:17 actually come into play? when you're 2:18 behind on payments or there's an 2:20 approaching foreclosure as well as 2:22 financial hardship and negative equity. 2:24 Compounding the issue could also include 2:26 the property needs repairs that can't be 2:28 addressed, divorce, probate situations, 2:31 or the home is set on the market for so 2:33 long that the numbers just no longer 2:35 make sense. Sometimes the situation 2:36 doesn't start with a short sale, it 2:38 becomes one, addicting. Let's clear up a 2:40 few things. Banks are not here to help 2:42 you in a short sale. Banks are 2:43 protecting their position. Short sales What the lender approval letter actually controls 2:45 are not great deals. No, some sell 2:48 pretty close to actual market value. 2:49 Once approved, it's not a quick closing. 2:52 Most of the time, there are still 2:53 conditions to be met. Short sales are 2:55 not a deal. They're not a shortcut, and 2:57 they're not guaranteed. There are loss 2:59 mitigation strategies driven by the 3:00 lender. And and they work best for 3:03 sellers trying to avoid foreclosure and 3:05 for buyers who understand the process. 3:07 If you're dealing with a situation like 3:08 this, the first step is not deciding on 3:10 a short sale. It's understanding your 3:12 position. Once you understand your 3:14 numbers, your constraints and your Deficiency judgments — forgiven or pursued 3:15 options, then you can make the right 3:17 decision. That down, see the link down 3:19 in the description and you can start the 3:21 process there. When the situation is not 3:23 straightforward, the process has to be.