In short: A short sale is a sale for less than the mortgage balance, approved by the lender. Compared with a foreclosure, it usually costs you less credit damage, ends faster, and lets you control the timing. The two things that make or break it: a written waiver of the deficiency, and a plan for the tax on forgiven debt, since the principal-residence exclusion generally doesn’t cover debt forgiven in 2026.
Matt’s position for over a decade has been simple: if you have equity, list the house now; if you’re underwater and don’t plan to stay, a well-negotiated short sale usually beats waiting for a foreclosure. The details decide whether it actually helps you.
What a Short Sale Is
A short sale is a sale of your house for less than what you owe, with the lender’s approval. You list with a realtor, find a buyer, and the lender agrees to accept the net proceeds and release its mortgage.
Why It Usually Beats Foreclosure
- You control the timing. A foreclosure runs on the court’s calendar. A short sale runs on yours, within limits.
- No public auction. No auction listing, no investor bidding on your house.
- Less credit damage. Future lenders generally treat a short sale less harshly than a completed foreclosure. See foreclosure and your credit.
- It works with a second mortgage. A deed in lieu usually doesn’t. A short sale can satisfy both lenders.
Timing Decides Everything
Matt says in the 2026 videos that timing decides everything: the market is softening, foreclosure cases are moving faster than in the last cycle, and the homeowner who lists early has more options than one who lists after a judgment. If you have equity, list now and keep it.
Get the Right Realtor
A short sale isn’t a normal listing. Matt recommends realtors who know short sales (Florida Realtors offers a short-sale specialist designation) and who understand that their job is to get you out cleanly. A good realtor will also tell you to get a lawyer, because a foreclosure is a lawsuit and a realtor can’t give legal advice.
Get the Deficiency Waiver
Without a waiver, the lender can pursue the difference. Section 702.06 limits a deficiency on owner-occupied residential property to the outstanding debt minus the property’s fair market value, but that can still be a lot of money. The approval letter must say the deficiency is waived. See deficiency judgments.
The 1099-C Problem in 2026
In his 2013 video Matt walks through the math: a $200,000 mortgage, a $100,000 short sale, and $100,000 of forgiven debt reported on a 1099-C. For years, homeowners excluded that from income on a principal residence using IRS Form 982.
That exclusion, IRC § 108(a)(1)(E), applies to debt “discharged before January 1, 2026,” or under a written arrangement entered into before that date. It hasn’t been extended. A short sale closing in 2026 generally needs another answer, most often the insolvency exclusion. Plan the tax side before you sign the contract, not when the 1099-C arrives.
Watch: the videos behind this article
Short Sale or Foreclosure in Florida — Which One Is Better for You?
What Is a Short Sale? | 2026 Florida Short Sale & Foreclosure Guide
The Key to Resolving Foreclosures in Florida- Short Sales and 1099-C Tax Liablity
Buried in Debt? The “Secret” Short Sale Exit Strategy to Finally Be Free
Go Deeper
- Deed in Lieu of Foreclosure in Florida: How It Works and What to Get in Writing
- Deficiency Judgments in Florida: Zombie Mortgage Debt After Foreclosure
- Foreclosure and Your Credit in Florida: How Long It Lasts and How to Limit the Damage
- Can You Sell Your House During Foreclosure in Florida? Yes, and Often You Should
Frequently Asked Questions
Is a short sale better than a foreclosure in Florida?
Usually, for a homeowner who doesn’t plan to keep the house. A short sale ends the debt on terms you negotiate, avoids a public auction, and is generally viewed less harshly by future lenders. It only works if the lender approves and waives the deficiency in writing.
Can the bank still come after me after a short sale in Florida?
Yes, unless the approval letter waives the deficiency. Section 702.06 allows a deficiency claim, capped for owner-occupied homes by the property’s fair market value. Read the approval letter before closing.
Do I owe taxes on a short sale?
Possibly. Forgiven debt is generally income reported on Form 1099-C. The principal-residence exclusion in IRC § 108(a)(1)(E) covers debt discharged before January 1, 2026, or under a written arrangement made before then. Insolvency may still apply. Get tax advice.
Can I do a short sale with two mortgages?
Yes. Both lenders have to agree, and the second lender usually wants a payment from the first lender’s proceeds. Short sales often work better than deeds in lieu when there is a second mortgage.
Talk to a Florida foreclosure defense lawyer
Weidner Law, P.A. has defended Florida homeowners in foreclosure for more than 25 years, from St. Petersburg. If you need a foreclosure defense lawyer in St. Petersburg or anywhere in Florida, call (727) 954-8752 or email weidner@mattweidnerlaw.com.
Read the law yourself, free: Chapter 702, Florida Statutes (Foreclosure of Mortgages and Liens) and Chapter 45 (Judicial Sales).
This article is general information about Florida law, not legal advice about your situation. Reading it, watching the videos, or contacting the firm does not create an attorney-client relationship. Every case turns on its own facts, and past results do not guarantee a similar outcome. The hiring of a lawyer is an important decision that should not be based solely upon advertisements.
