This guide provides a professional procedural framework for listing and closing FHA (HUD) and Conventional short sales in Florida. It incorporates essential technical insights derived from complex judicial foreclosure transactions.

Phase 1: The Initial Request & Evaluation

●     Contact the Lender: The owner must contact the 'Loss Mitigation' or 'Home Retention' department immediately.

●     Request the 'Loss Mitigation Package': Collect financial forms, hardship letter, and Form 4506-C.

●     Identify the Loan Type: Determine if it is FHA (government-insured) or Conventional.

●     FHA/HUD Protocol: Evaluation for the HUD Pre-Foreclosure Sale (PFS) Program leads to an 'Approval to Participate' (ATP).

●     Note on Legal Counsel: Sellers are strongly encouraged to retain a real estate attorney, particularly in Florida’s judicial foreclosure environment. An attorney can negotiate a "deficiency waiver" to ensure the seller is legally released from the remaining debt after closing.

●     Manage Junior Liens: Identify secondary debt (Junior Mortgages, HUD Partial Claims, or HOA Liens). For HUD Partial Claims, you only need a payoff statement (ask title to do a preliminary title/lien search)t.

●     Foreclosure Pause: Request a 'pause' on the foreclosure clock. Attorneys can often file formal motions to stay proceedings more effectively than a broker.

Phase 2: The 'Approval to Participate' (ATP) Hurdles

●     FHA Appraisal: For FHA, the lender orders an appraisal *first* to determine 'As-Is' value before listing. You do not need to wait to list, however it’s possible the contract might be rejected if the listing wasn’t listed at the appraised value or higher.

●     The 10-Day 'Wet Signature' Trap (CRITICAL): The HUD-90045 (ATP) must be signed and returned within 10 days. Always obtain ink-on-paper ('Wet') signatures.

●     Realtor Authorization: Submit the Third-Party Authorization form immediately. Lender will usually tell you an email address to send the forms to and include the loan number in the subject line. You may need to call to find out where to send the forms to.

Phase 3: Listing & Marketing Requirements

●     The 7-Day Window: The home must be listed in the MLS at the Appraised Value or higher within 7 days of the ATP date.

●     Mandatory Wording: The listing agreement between Broker and Seller must include the verbatim cancellation clause allowing the seller to cancel without commission if conveyed to the mortgage holder. Lender will provide exact wording that must be included in your listing agreement

●     Commission & Fees: Total commission must be 6% or less. Buyers typically pay their own closing costs as lenders usually do not allow any concession to be paid by seller/lender.

●     HOA & Liens: Lenders may pay up to 1 year of HOA dues (no late/attorney fees). The buyer is responsible for the HOA Estoppel fee (s). Obtain the current HOA statement and if there are late fees or dues owed more than 1 year let buyer know they must pay for this if seller cannot afford. Include this in the original contract.

●     The 15-Day Rule: Property must be listed for at least 15 days before accepting or submitting any offers.

Phase 4: The Offer & Submission Package

●     Arm's-Length Requirement: All parties must sign an affidavit confirming they are not related by blood or business to the seller. The seller cannot remain in the property as a tenant.

●     Closing Timeline: Allow for 45 to 60 days in the contract, more if buyer is obtaining financing.

●     ****Submission Checklist****:

○     Sales Contract & Addendums (including Short Sale Approval Contingency CR-7)

○     Lender’s PFS Addendum (Requires Wet Signatures)

○     Preliminary Closing Statement (showing all fees/net to seller’s lender)

○     HOA Estoppel/Statement

○     Listing Agreement. Make sure cancellation clause is written. If price was reduced make sure modification to listing agreement is attached

Phase 5: Approval, Variances & Final HUD

●     The 88% Net and Variances: Standard rules require 88% net of appraisal. If the appraisal is too high, submit a Valuation Dispute with photos of damages and repair estimates.

●     Final HUD-90052: Submit the Final HUD to the lender. They will return HUD Form 90052, which requires immediate wet signatures after closing.

●     Post-Closing Tax Advice: Remind sellers that they will receive a 1099-C. Advise them to consult a tax professional regarding IRS Form 982 to potentially avoid tax on forgiven debt.

Quick Comparison: FHA vs. Conventional

Extra Advice: Have the owner presign the Short Sale Approval Contingency (CR-7), Flood Disclosure, HOA Addendum, and Seller’s Disclosure to include in MLS attachments for buyer..

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