In real estate, a short sale occurs when a homeowner is in financial distress. Usually the owner must sells their property for less than the amount due on the mortgage. The buyer of the property is a third party (not the bank) and all proceeds from the sale go to the lender (the bank). The lender either forgives the differences or obtains a deficiency judgment against the borrower requiring them to pay the lender all or part of the difference between the sale price and the original value of the mortgage. Due to the fact that Florida is a no-fault state, in most case the debt is forgiven.
Before resigning yourself to a short sale, talk to your lender about the possibility of a revised payment plan or loan modification. One of these options may allow you to stay in your home and get back on track. Another possible option for staying in your home arises if you have private mortgage insurance (PMI). Many homeowners who purchased homes with less than 20% down were required to purchase PMI on their home. If the PMI company feels you have a chance at recovering from your current financial situation, it may advance funds to your lender to bring your payment up to date. Eventually, you’ll have to repay the advance.