The Complete Orlando Short Sale Guide for Homeowners
Facing financial hardship, behind on payments, or worried about losing your home? This short sale guide is written specifically for Orlando and Central Florida homeowners who need real answers, not sales fluff.
Quick Answer: What Is a Short Sale?
A short sale is when a homeowner sells their property for less than the total amount owed on the mortgage, with lender approval. It allows distressed homeowners to avoid foreclosure, reduce financial damage, and exit an unaffordable situation more responsibly.
What This Short Sale Guide Covers
How short sales work in Florida
Who qualifies and who doesn’t
The real pros and cons (no sugar-coating)
Step-by-step Orlando short sale process
Common mistakes that delay or kill approvals
How local experience changes outcomes
How a Short Sale Works (Beginner-Friendly Explanation)
In a short sale, the lender agrees to accept less than the full loan balance because the alternative—foreclosure—is usually more expensive and time-consuming for them.
The lender reviews your financial hardship, property value, and market conditions before deciding whether to approve the sale.
Common Short Sale Mistakes (That Cost Time or Kill Deals)
Overpricing the home
Missing or outdated financial documents
Using an agent without short sale experience
Ignoring lender timelines
Waiting until foreclosure is imminent
How Short Sales Work Differently in Orlando
Central Florida short sales come with unique challenges:
Multiple-lien properties
HOA and condo association approvals
Investor-heavy buyer pools
Rapid market shifts affecting lender values
Local knowledge matters. What works in another state often fails here.
My Experience With Short Sales in Central Florida
I’ve helped homeowners across Orlando and Central Florida navigate complex short sale situations—many involving multiple lenders, aggressive timelines, and high financial stakes.
As a Certified Distressed Property Expert, I understand lender behavior, valuation disputes, and how to protect sellers from unnecessary liability.
Homeowners can avoid foreclosure by acting early and choosing the right option—such as loan modification, repayment plans, selling before auction, or a short sale. In Orlando and Central Florida, timing matters. The sooner you respond to lender notices and understand your local options, the more control you keep.
What Does Foreclosure Mean?
Foreclosure happens when a lender takes legal action to recover a property after missed mortgage payments. In Florida, foreclosure is a judicial process, meaning it goes through the court system. That creates both pressure and opportunity—if you act fast.
Why Homeowners in Orlando Fall Into Foreclosure
Job loss or income reduction
Medical bills or unexpected expenses
Rising insurance and property tax costs
Divorce or major life changes
Adjustable-rate mortgage increases
Foreclosure is rarely caused by one bad decision. It’s usually a slow buildup—and that means there are often multiple ways out.
How to Avoid Foreclosure: Your Main Options
1. Loan Modification
A loan modification permanently changes your mortgage terms. This may include a lower interest rate, extended loan term, or adding missed payments to the balance.
2. Repayment Plan or Forbearance
If your hardship is temporary, lenders may allow you to pause or spread out missed payments. These options work best when income is expected to recover.
3. Sell the Home Before Foreclosure
Selling before the foreclosure sale protects your credit far more than letting the process finish. This option works well when there is equity or when pricing is realistic.
4. Short Sale (When You Owe More Than the Home Is Worth)
A short sale allows the lender to accept less than the amount owed. This is where experience matters. I’ve handled hundreds of distressed transactions and understand how banks evaluate hardship, pricing, and approvals.
Foreclosure vs Your Other Options (Quick Comparison)
Option
Credit Impact
Timeline
Control Level
Loan Modification
Low to Moderate
30–90 days
Medium
Sell Before Foreclosure
Low
30–60 days
High
Short Sale
Moderate
60–120 days
Medium
Foreclosure
Severe
6–12 months
None
How Foreclosure Works in Orlando and Central Florida
Florida is a judicial foreclosure state. That means lenders must file a lawsuit before taking your home. This process usually takes several months, sometimes longer, giving homeowners a critical window to act.
In Orlando, many homeowners wait too long because they assume nothing can be done after the court case starts. That’s simply not true. Sales and short sales can often still happen before the auction date.
Common Mistakes That Make Foreclosure Worse
Ignoring lender letters or court notices
Waiting until the auction date to ask for help
Overpricing the home “just to try”
Working with agents who lack short sale experience
Assuming bankruptcy is the only solution
FAQs: How to Avoid Foreclosure
Can I avoid foreclosure once the court case starts?
Yes. In many Orlando cases, options still exist until the auction date.
Is selling better than foreclosure?
Almost always. Selling protects your credit and future buying power.
How long does foreclosure take in Florida?
Typically 6–12 months, sometimes longer depending on court backlogs.
Will a short sale ruin my credit?
It impacts credit, but far less than a completed foreclosure.
Do I need cash to do a short sale?
No. Most short sales require no out-of-pocket payment.
Can I buy another home after foreclosure?
Yes, but waiting periods and loan terms are stricter.
Should I talk to my lender or a Realtor first?
Both—but start with someone who understands distressed options.
What if my home has no equity?
You may still avoid foreclosure through a short sale or modification.
Why Work With Orlando Realty Consultants?
Foreclosure is stressful—but bad advice makes it worse. Orlando Realty Consultants specializes in helping Central Florida homeowners navigate tough situations with clarity and strategy.
We don’t sugar-coat options. We explain what works, what doesn’t, and what protects you long-term.
Talk to a Real Foreclosure & Short Sale Expert
If you’re behind on payments or worried foreclosure may be coming, don’t wait. The earlier you act, the more options you keep.
Orlando Realty Consultants
Phone: 407-902-7750
Service Area: Central Florida
Call today for a private, no-pressure conversation about how to avoid foreclosure and move forward.
If you owe more on your Orlando home than it can sell for, or you can no longer afford the mortgage payments, a short sale may provide a structured way to sell the property and avoid completing a foreclosure.
This guide explains how short sales work in Orlando and Central Florida, what lenders require, how long approval may take, the risks involved and the steps homeowners should take in 2026.
Quick Answer
A short sale occurs when a mortgage lender approves the sale of a property for less than the total debt secured by the home. Orlando homeowners generally consider a short sale when financial hardship and insufficient equity make a traditional sale impossible. The lender must approve the purchase price, expenses and settlement terms before closing.
What Is a Short Sale in Real Estate?
A real estate short sale happens when the proceeds from selling a property are not enough to pay the mortgage balance and other approved obligations in full.
Because the mortgage lender would receive less money than it is owed, the transaction cannot close without the lender’s written authorization.
The word “short” refers to the sale proceeds being short of the amount owed. It does not mean that the transaction will be completed quickly.
Simple Orlando short sale example
Suppose an Orlando homeowner owes $360,000 on a mortgage, but the home’s realistic market value is approximately $325,000.
After real estate commissions, title charges, property taxes, association balances and other closing expenses, the lender may receive considerably less than $325,000.
If the homeowner cannot bring enough money to closing to cover the shortage, the homeowner may ask the lender to approve a short sale.
The Consumer Financial Protection Bureau describes a short sale as a loss-mitigation option in which a home is sold for less than the outstanding mortgage debt.
Who must approve a short sale?
Approval may be required from several parties, including:
The primary mortgage servicer
The owner or investor behind the mortgage
A second-mortgage or home-equity lender
A mortgage insurance company
An FHA, VA, USDA or conventional loan program
A homeowners or condominium association
Judgment, tax or other lienholders
Every lien or secured claim affecting the property must be resolved before the sale can close.
Who May Qualify for a Short Sale?
A lender will generally consider a short sale when the homeowner has a documented financial hardship, cannot maintain the mortgage and does not have enough equity to complete a traditional sale.
Common financial hardships
Job loss
Reduced income or work hours
Divorce or separation
Medical expenses or disability
Death of a borrower or household income earner
Business failure
Unaffordable mortgage payment increases
Necessary employment relocation
Military transfer
Major property damage
Increasing insurance, HOA or property ownership costs
A hardship does not guarantee approval. The lender will normally evaluate the homeowner’s financial condition, the property’s market value, the expected sale proceeds and the lender’s likely recovery through foreclosure.
Do you have to be behind on mortgage payments?
Not always. Some lenders may evaluate a homeowner who is current on the mortgage but facing an imminent and documented hardship.
Eligibility depends on the mortgage investor, loan program and servicing guidelines.
Homeowners should not intentionally stop making payments simply to appear eligible for a short sale. Missed payments may cause late fees, collection activity, credit damage and foreclosure.
A short sale may not be necessary when:
The property has enough equity for a traditional sale
A loan modification would make the payment affordable
The homeowner can reinstate the loan
A repayment or forbearance plan is available
The homeowner can pay the shortage without creating further hardship
The lender will not release the mortgage lien on acceptable terms
Bankruptcy or another legal solution requires immediate review
How the Short Sale Process Works
Every mortgage servicer has its own requirements, but most Orlando short sales follow the same general process.
1. Review the property’s value and total debt
The first step is determining the home’s probable market value, mortgage payoff, liens and estimated selling expenses.
This review helps establish whether the property is truly underwater and whether a normal sale is possible.
The homeowner and Realtor should also review:
Foreclosure status
Upcoming court deadlines
Property condition
HOA or condominium balances
Second mortgages
Judgments and other liens
2. Contact the mortgage servicer
The homeowner should contact the mortgage servicer and request information about available mortgage assistance and loss-mitigation options.
The servicer may provide a short sale package, borrower assistance application or online submission portal.
The lender will usually require financial statements, income verification, bank records, mortgage information and a written explanation of the hardship.
An incomplete package is one of the most common reasons for delays. Missing signatures, incomplete statements and expired financial records can stop the review.
4. Price and list the Orlando property
The home should be priced according to current Orlando-area market conditions, comparable sales, property condition and buyer demand.
The list price should not be based on the mortgage balance. It should also not be intentionally set far below market value to attract an unrealistic offer.
The lender may order:
A broker price opinion
A professional appraisal
An automated valuation
An interior or exterior property inspection
If the buyer’s offer is substantially below the lender’s valuation, the lender may reject the offer or demand a higher price.
5. Obtain a qualified buyer
The homeowner may accept a purchase offer subject to third-party short sale approval.
A strong short sale offer should include:
A fully signed purchase contract
Proof of funds or mortgage preapproval
A realistic closing date
Clear short sale contingency language
Buyer acknowledgment of lender approval
Reasonable inspection and financing terms
The homeowner can accept the buyer’s offer, but only the mortgage lender can approve the shortage and authorize the release of its lien.
6. Submit the offer to the lender
The Realtor or short sale negotiator submits the contract, estimated settlement statement, buyer qualifications and homeowner’s financial package to the servicer.
The lender reviews:
The homeowner’s hardship
The purchase price
The property’s market value
Estimated net proceeds
Requested closing expenses
Junior liens
Association balances
The homeowner’s income and assets
7. Negotiate the short sale terms
The lender may approve the offer, reject it, request additional documents or issue a counteroffer.
A verbal approval is not sufficient. The homeowner should receive and carefully review the lender’s written approval letter.
The approval letter should identify:
The approved buyer
The approved purchase price
The lender’s required net proceeds
The expenses the lender will allow
The final closing deadline
Whether the mortgage lien will be released
Whether the remaining balance is waived
Whether the lender requires a contribution
Whether relocation assistance is approved
A release of the mortgage lien does not always mean the lender has released the homeowner from personal liability for the remaining debt.
9. Complete financing and closing
After written approval, the buyer completes any remaining inspections, financing, appraisal, title and insurance requirements.
Short sale approval letters normally include a firm closing deadline. If the transaction does not close before the deadline, an extension or additional lender review may be required.
Short Sale Document Checklist
Exact requirements vary by lender, but Orlando homeowners should be prepared to provide the following:
Signed borrower authorization form
Mortgage assistance or loss-mitigation application
Hardship letter
Recent mortgage statements
Recent pay stubs or income verification
Complete bank statements
Federal tax returns, when requested
Profit-and-loss statement for self-employed borrowers
Monthly income and expense worksheet
HOA or condominium statements
Information about judgments and liens
Listing agreement
Signed purchase contract and addenda
Buyer’s proof of funds or mortgage preapproval
Estimated closing or settlement statement
Comparable sales and market analysis
Provide every requested page, including blank pages when the lender asks for a complete statement. Documents may need to be updated if they expire during the review.
How Long Does a Short Sale Take in Orlando?
A short sale may take several months from the initial preparation through closing.
Some straightforward transactions move faster, while files involving multiple mortgages, HOA liens, probate, bankruptcy, title defects or foreclosure deadlines may take much longer.
Many Florida short sales take approximately four to eight months, although no Realtor can guarantee a lender’s approval timeline.
Typical Orlando short sale stages and estimated timing
Stage
Typical activity
Estimated timeframe
Initial review
Evaluate property value, mortgage debt, liens and foreclosure status
Several days to 2 weeks
Document preparation
Gather and submit the homeowner’s financial package
1 to 3 weeks
Property marketing
List the property and obtain a qualified buyer
Varies
Lender review
Review hardship, offer, valuation and settlement terms
30 to 120 or more days
Negotiation
Resolve price, liens, expenses and approval conditions
2 to 8 or more weeks
Approval to closing
Complete financing, title, insurance and final requirements
2 to 6 weeks
What can delay a short sale?
Missing or expired financial documents
Multiple mortgages or judgment liens
Unpaid HOA or condominium balances
An unrealistic purchase price
A lender valuation dispute
A buyer who becomes unwilling to wait
Mortgage servicing transfers
Probate or divorce complications
Bankruptcy proceedings
Municipal or title liens
Delayed responses to lender requests
Who Pays the Costs in a Short Sale?
In many approved short sales, ordinary selling expenses are paid from the sale proceeds rather than directly by the homeowner.
However, the lender controls which expenses it will allow and may limit or reject certain charges.
Potentially approved expenses may include:
Real estate commissions
Title and settlement charges
Recording expenses
Florida documentary stamp taxes
Prorated property taxes
Approved HOA or condominium balances
Buyer closing-cost assistance
Limited repair-related credits
The lender may require the homeowner to contribute money or sign a promissory note as a condition of approval.
Florida Deficiency Judgments and Short Sales
A deficiency is the unpaid portion of the mortgage debt remaining after the lender applies the proceeds from the short sale.
A short sale does not automatically eliminate that balance.
Florida law may permit a mortgage lender to pursue a deficiency under certain circumstances. Homeowners should carefully review the approval letter and obtain legal advice when necessary.
The strongest outcome is generally an approval letter stating clearly that the lender waives or forgives the remaining deficiency and releases the homeowner from further liability.
Do not assume that vague language provides a complete waiver.
Short Sale Tax Consequences in 2026
Mortgage debt canceled in a short sale may be treated as taxable income unless an exclusion or exception applies.
A lender may issue IRS Form 1099-C reporting the amount of canceled debt.
Federal mortgage-debt rules have changed over time. Homeowners should not rely on older online articles stating that all forgiven mortgage debt is automatically tax-free.
Speak with a qualified accountant or tax attorney before completing the transaction.
Orlando Realty Consultants does not provide legal, credit, accounting or tax advice.
Short Sale vs. Foreclosure
A short sale and a foreclosure can both result in the homeowner leaving the property, but they are not the same process.
A short sale is a negotiated sale involving the homeowner, buyer and lender. A foreclosure is a legal process used by the lender to enforce the mortgage.
Short sale and foreclosure comparison
Issue
Short Sale
Foreclosure
Who initiates it?
The homeowner voluntarily lists and sells the property
The mortgage lender files a legal action
Control over the sale
The homeowner participates in pricing, marketing and reviewing offers
The homeowner has limited control as the case progresses
Lender approval
Required before closing
The lender proceeds through the Florida court system
Public court action
A short sale alone does not create a foreclosure lawsuit
Florida foreclosure is a judicial court process
Deficiency risk
May be negotiated in the approval letter
May remain after foreclosure, subject to applicable law
Credit impact
May be significant, especially when payments are missed
Generally considered a major derogatory credit event
May help the homeowner avoid completing a foreclosure
Provides more control over marketing and move-out timing
May resolve an unaffordable mortgage
May allow negotiation of the remaining deficiency
The lender may approve normal selling expenses
Some programs may provide relocation assistance
Potential disadvantages
Lender approval is not guaranteed
The process can take several months
Extensive financial documentation may be required
The lender may counter the purchase price
Credit may still be damaged
Forgiven debt may have tax consequences
A deficiency may remain after closing
The property may need to be sold as-is
Alternatives to a Short Sale
A short sale is one form of mortgage loss mitigation, but it is not the only possible option.
Reinstatement: Paying the past-due mortgage balance and permitted charges.
Repayment plan: Spreading the past-due balance over additional monthly payments.
Forbearance: Temporarily reducing or pausing payments under a lender-approved plan.
Loan modification: Changing one or more mortgage terms to create a more affordable payment.
Traditional sale: Selling the property normally when sufficient equity exists.
Deed in lieu of foreclosure: Voluntarily transferring the property to the lender under approved terms.
Bankruptcy consultation: Obtaining legal guidance when broader debt or foreclosure issues exist.
The best option depends on the homeowner’s goals, property equity, mortgage status, financial hardship and foreclosure timeline.
Common Short Sale Mistakes
Waiting too long
Starting after a foreclosure sale has been scheduled leaves less time to market the property, secure a buyer and obtain lender approval.
Listing a property for sale does not automatically stop foreclosure.
Hiring an agent without short sale experience
A traditional listing and a short sale are not the same. The agent must understand lender packages, valuations, liens, approval letters and buyer retention.
Pricing the property incorrectly
Overpricing can prevent offers. Severe underpricing may result in a lender rejection or counteroffer.
The price must be supported by current Orlando-area comparable sales and the property’s condition.
Submitting an incomplete package
One missing signature or bank-statement page can delay the review. Financial documents may also need to be updated during the process.
Ignoring second mortgages and liens
The first lender’s approval does not automatically clear second mortgages, judgments, municipal liens or association claims.
Assuming the deficiency is forgiven
A lender’s agreement to release its mortgage lien does not necessarily mean it has waived the remaining debt.
Accepting an uncommitted buyer
A buyer who does not understand the short sale timeline may cancel before the lender completes its review.
Abandoning the property too early
The homeowner generally remains responsible for maintenance, security, utilities, insurance and association obligations until ownership transfers.
How Short Sales Work in Orlando and Central Florida
Mortgage lenders use national servicing guidelines, but the successful marketing and negotiation of an Orlando short sale depends heavily on local real estate conditions.
A condominium near Downtown Orlando should not be valued the same way as a single-family property in Hunters Creek, a townhome near UCF or an investment home in Kissimmee.
Local buyer demand, property condition, insurance availability, HOA finances and rental restrictions may all affect the transaction.
Central Florida issues to address early
HOA and condominium balances: Past-due assessments, attorney fees and association liens may exceed the amount the mortgage lender will approve.
Property insurance: Roof age, electrical panels, plumbing and other insurance issues may affect buyer financing.
Deferred maintenance: Serious repair problems may affect property value and loan eligibility.
Tenant occupancy: Leases, deposits and access may complicate investment-property sales.
Municipal liens: Open permits, code violations and municipal balances may create title problems.
Foreclosure litigation: Florida is a judicial foreclosure state, so homeowners should not ignore court filings or hearing dates.
Example of an Orlando short sale
Assume an Orlando home is worth approximately $315,000, while the mortgage payoff is $338,000.
The homeowner also owes property taxes, HOA charges and transaction expenses. Even an offer at full market value would not generate enough money to pay every obligation.
The home is listed at a market-supported price, and a qualified buyer offers $312,000.
The mortgage lender orders a valuation, reviews the hardship package and analyzes the proposed closing statement.
The lender may accept the offer, demand a higher price, reduce approved expenses or require a homeowner contribution.
If acceptable terms are reached, the lender issues a written approval letter with a final closing deadline.
This example is simplified. Actual outcomes depend on the mortgage program, liens, property value, lender and homeowner’s financial circumstances.
Short Sale Information for Orlando Buyers
A buyer may be able to purchase a short sale property at a competitive price, but a short sale is not automatically a bargain.
The mortgage lender will compare the offer to the property’s market value and may counter an offer it considers too low.
Orlando short sale buyers should:
Obtain mortgage preapproval before making an offer
Confirm whether the seller has started the lender process
Understand that third-party approval is required
Budget for property inspections
Expect the property to be sold as-is
Keep financial documents current
Review contract deadlines carefully
Remain flexible about the closing date
Complete full title and insurance due diligence
Lender approval does not replace a home inspection, appraisal, title examination or insurance review.
What Orlando Homeowners Should Do Next
Locate your latest mortgage statement.
Obtain an estimated mortgage payoff.
Determine the home’s realistic current market value.
Identify every mortgage, HOA balance, judgment and lien.
Contact the mortgage servicer about loss-mitigation options.
Do not ignore foreclosure notices or court deadlines.
Consult an experienced Orlando short sale Realtor.
Speak with legal and tax professionals when appropriate.
Keep the property maintained, secure and insured.
The earlier the homeowner reviews the numbers and deadlines, the more options may remain available.
Frequently Asked Questions About Short Sale Information
What is the most important short sale information for a homeowner?
The most important point is that the mortgage lender must approve the transaction because the sale proceeds will not pay the secured debt in full. Homeowners should understand lender requirements, timelines, deficiency terms, tax concerns and foreclosure deadlines before proceeding.
Do I have to miss mortgage payments to qualify for a short sale?
Not always. Some lenders consider homeowners who are current but can document an imminent hardship. Eligibility depends on the mortgage investor and loan program. Do not intentionally miss payments without understanding the consequences.
How long does an Orlando short sale take?
Many short sales take approximately four to eight months, although the timeframe varies. Multiple liens, missing documents, lender valuations, buyer financing and HOA claims can extend the process.
Can a short sale stop an Orlando foreclosure?
A lender may delay foreclosure while reviewing an approved loss-mitigation application, but simply listing the property does not automatically stop a foreclosure case or scheduled sale.
Will I owe money after a Florida short sale?
Possibly. The remaining mortgage balance is known as a deficiency. Whether the lender waives, forgives or preserves that debt depends on the written approval terms and applicable law.
Will a short sale affect my credit?
Yes. A short sale and related missed mortgage payments may negatively affect credit. The exact impact depends on how the lender reports the account and the homeowner’s overall credit history.
Can I complete a short sale if my Orlando home needs repairs?
Yes. Many short sale properties are sold as-is. However, serious roof, electrical, plumbing or structural problems may reduce the home’s value and limit buyer financing options.
Who pays the real estate commission in a short sale?
The lender commonly approves the commission as an expense paid from the sale proceeds. The lender may limit the amount it will allow as part of the final settlement.
Can the homeowner receive money at closing?
A homeowner usually cannot receive undisclosed sale proceeds when the lender is accepting less than the mortgage debt. Certain lender programs may approve relocation assistance, but it must be disclosed and authorized in writing.
Do I need a short sale Realtor in Orlando?
An experienced short sale Realtor can price and market the property, organize the lender package, communicate with the mortgage servicer, manage buyer expectations and help negotiate approval terms.
Get Short Sale Help in Orlando and Central Florida
General short sale information cannot determine whether your property has enough equity, whether your lender will approve a short sale or how much time remains before foreclosure.
Orlando Realty Consultants helps Central Florida homeowners evaluate their options, prepare short sale packages, market distressed properties and communicate with mortgage servicers throughout the approval process.
We can help you evaluate:
Your estimated property value
Your mortgage shortage
Current Orlando real estate conditions
The documents required by your lender
Possible HOA, lien and title complications
A realistic listing strategy
The lender’s final approval terms
Call Orlando Realty Consultants at 407-902-7750 for a confidential short sale consultation.
Serving Orlando and Central Florida. Se habla español.
Are you behind on your mortgage and worried that the lender might go after your other assets if your home gets foreclosed on?
Unfortunately, it can happen if you live in Florida. This scenario can occur in an instance where if the bank is unable to recoup the full amount of the loan especially if it’s a large loan.
With such a large number of Orlando foreclosures still looming many homeowners are wondering if their lender can garnish their salary or personal bank accounts.
The problems that can crop up from a typical foreclosure sale don’t usually occur until after the sale has taken place and the bank ends up with the short end of the stick.
Here in Florida lenders can go to the court for a “deficiency judgment” in order to try and collect the rest of the money that is owed after the foreclosure. With a deficiency judgment in their possession, banks can go after your personal assets like a car or a boat. However, if the asset isn’t yet paid off, then the lender will have to settle for the second position after the lender for the car or boat, etc.
Florida lenders don’t usually go after a person’s assets following a foreclosure sale especially if they don’t see much to tap into.The truth is that collecting judgments is extremely time-consuming and can be quite costly to the bank.
Banks will pay more attention to homeowners with homes that are worth millions of dollars because the larger the loan the bigger the loss. In these cases, the lenders will check the borrower’s bank accounts especially if the accounts are with the same bank. Depending on the situation, banks can move to freeze or garnish these accounts. Banks will also go after businesses that default on large commercial properties.
Just When You Thought It Was Over
There’s another risk that exists for smaller borrowers that may occur down the line. Many times, banks end up selling off these types of judgments to investors or collection agencies for pennies on the dollar. These agencies hire people that are dedicated to hound people any way they can for a settlement. Since judgments are valid for up to twenty years, it gives them more than enough time to come after the borrower for the balance due.
Avoiding A Deficiency Judgment
The best way to avoid a deficiency judgment is for people to deal with their mortgage problems head-on. take action! If a borrower has the chance to pursue a short sale with their lender then they should do it. Not dealing with the problem is the absolute worst thing that someone can do to themselves. It’s like having a financial ticking time bomb on their hands. Borrowers are soo much better off working with the bank as opposed to avoiding them.
It’s extremely important that the short sale payoff be recorded as a “full payoff”. To ensure that things are done correctly, enlist the help of a short sale expert. Find a short-sale realtor in your area that has a high closing ratio. Avoid realtors that aren’t experienced in the short sale arena or that have only done a few. Selling a home is one of the most, if not the most important transaction of a person’s life so it’s crucial that they find the best-qualified realtor for the job.
Loan modifications have helped thousands of Orlando homeowners to keep their homes.
However, you must be aware of the fine print and know exactly what it will mean to you. Sometimes the terms of a loan modification are often worse than the original mortgage. The best loan modifications are when you are able to not only reduce your payment but reduce the principal balance of the loan. Many loan mods are structured so that your payment gets reduced but you still have to pay off the entire amount of the original mortgage plus penalties. In my opinion, these types of loan modifications are just not worth agreeing to. If your house is only worth $100,000.00 and your loan amount is $200,000.00 why on earth would you want to end up paying that entire amount?
Push for a loan modification with principal balance reduction
Banks will always try to get you to agree to what suits them better, this is why you have to be a tough negotiator, don’t just agree with the first proposal that they put in front of you. You have to remember that banks also want to come to an agreement. It costs lenders a lot of time and money to take someone through the foreclosure process. The best thing you can do is hire an Orlando real estate attorney that specializes in loan modifications. If you try to go at it alone with your lender, it could end up costing you a lot more money in the long run. Sure, a good Orlando real estate attorney may cost you a couple of grand upfront, but you’ll have a much better chance if you have an experienced negotiator in your corner.
5 things to watch out for when negotiating an Orlando loan modification
1- Your lender has the option of dropping all penalties. Don’t be bullied into a take-it or leave-it trap where they give you the option to pay off the penalties upfront or have them roll the penalties into the balance. You should demand that they wave all penalties as part of the deal.
2- Sometimes lenders will try to get you to agree that if they lose the original loan documents, you must assist the lender in reproducing them. As ridiculous as this may sound, it’s true and you should never agree to something like this. It comes down to the lender having additional legal protection if they screw up. A clause like this has absolutely no benefit to you.
3- Step by step rate increases that are too steep for you to afford or balloon payments that become due before you have time to be prepared for them.
4- Don’t agree to payments that you really can’t afford. When doing a loan modification, the idea is to make the loan affordable to you and your family. Be realistic, don’t put yourself into a position where your budget is soo tight that you’re only one major car repair away from being in default again.
5- Don’t agree to an interest rate that can automatically adjust based on an index over which you have no control.
An Orlando Short Sale may be your best option
As you can see, there are a lot of things that you need to watch out for when entering into a loan modification with your lender. The fact of the matter is that even when you have the bank’s best offer on the table, it still may not be good enough.
You may be much better off doing an Orlando short sale. At the end of the day, it’s just a house, it’s not part of your family. By doing an Orlando short sale, not only will you be free of your lender forever, but you can get enough cash back to start over and get yourself into a much better situation than you would be agreeing to the terms of a loan modification.
As always, if you have questions about anything to do with Orlando real estate. Call us and set up a free consultation with an Orlando real estate expert.
