Short sales can be one of the more complex transactions in Florida real estate — involving a distressed seller, a motivated buyer, and a lender who holds all the cards. Knowing how to use the FAR/BAR Short Sale Addendum (Rider) correctly can be the difference between a smooth closing and a deal that falls apart after months of waiting.
What Is a Short Sale
A short sale occurs when a homeowner sells their property for less than what is owed on the mortgage, with the lender agreeing to accept the reduced proceeds as full or partial satisfaction of the debt. In Florida, where the real estate market has seen dramatic boom-and-bust cycles, short sales remain a common tool for avoiding foreclosure.
Florida is a judicial foreclosure state, meaning lenders must go through the courts to foreclose — a process that can take a year or more. This gives sellers a meaningful window to pursue a short sale, but it also means buyers must be prepared for a lengthy, lender-driven timeline.
The FAR/BAR Short Sale Addendum: What It Does
The Florida Association of Realtors® and the Florida Bar jointly publish the FAR/BAR contract forms, including a Short Sale Addendum (sometimes called the Short Sale Rider) that attaches to the standard Residential Contract for Sale and Purchase.
The rider does several critical things:
Makes the contract contingent on lender approval. The sale cannot proceed — and neither party is legally bound to close — until the seller’s lender(s) issue a written Short Sale Approval Letter.
Defines “Lender Approval.” The addendum specifies what approval must include: the net proceeds accepted, any conditions on the seller (such as promissory notes or cash contributions), and confirmation that the deficiency will be waived or settled.
Establishes a Lender Approval Deadline. The parties agree on a date by which lender approval must be obtained. If approval is not received by that date, either party may terminate the contract and the buyer receives their deposit back.
Addresses the deposit. The buyer’s earnest money is typically held in escrow and is fully refundable if lender approval is not obtained or if either party terminates pursuant to the addendum
Step-by-Step: The Short Sale Process in Florida
Step 1 — List the Property and Execute the Contract
The seller’s agent lists the property, often at a price the lender is expected to approve based on market data and the lender’s likely minimum net. Once a buyer submits an offer, the parties execute the FAR/BAR contract with the Short Sale Addendum attached. Both parties should agree on a realistic Lender Approval Deadline — typically 90 to 120 days, though some transactions take longer.
Step 2 — Assemble the Short Sale Package
The listing agent or a designated short sale negotiator submits a complete short sale package to the lender. This generally includes:
- A hardship letter from the seller explaining the financial circumstances
- Two to three months of bank statements
- Recent tax returns and pay stubs (or proof of unemployment/disability)
- A signed copy of the executed purchase contract
- A preliminary HUD-1 or Closing Disclosure showing estimated proceeds
- A Broker Price Opinion (BPO) or appraisal may be ordered by the lender
Missing documents are the number-one cause of delays — get the full package in on the first submission.
Step 3 — Lender Review and BPO/Appraisal
After receiving the package, the lender assigns a loss mitigation specialist or outsources to a third-party servicer. The lender will typically order a Broker Price Opinion (BPO) — an independent valuation of the property. This figure heavily influences whether the lender approves the offer price.
If the BPO comes in above the contract price, the lender may counter. If it aligns with or comes in below the contract price, approval is more likely. This stage can take anywhere from a few weeks to several months.
Step 4 — Negotiation with the Lender
If the lender counters with a higher net, the parties have options: the buyer can increase their offer, the seller can attempt to negotiate further, or — if there is no agreement — either party may terminate under the addendum.
If there is a second mortgage or HELOC, that lienholder must also approve the short sale and typically negotiates a separate settlement amount with the first lender or buyer’s closing proceeds.
Step 5 — Short Sale Approval Letter
When the lender agrees to the terms, they issue a formal Short Sale Approval Letter (sometimes called an Approval of Short Sale or Short Payoff Approval). This letter is the trigger event under the FAR/BAR addendum — it satisfies the contingency and sets the closing timeline in motion.
Review the approval letter carefully. It should specify:
- The approved net proceeds to the lender
- The closing deadline imposed by the lender (often 30 to 45 days from issuance)
- Whether the deficiency balance is waived or if the seller owes a promissory note
- Any seller contribution requirements
Step 6 — Inspections, Title, and Closing
Once approval is in hand, the transaction moves much like a conventional sale — though on the lender’s accelerated closing schedule. The buyer should complete inspections promptly (many buyers inspect early in the process to avoid surprises). Title search, homeowner’s association estoppel letters, and lender financing must all be in order before closing.
Note: The closing must occur by the lender’s deadline, or the approval letter may expire and the entire approval process could need to restart.
Key Pitfalls to Avoid
Don’t miss the lender’s closing deadline. Once the approval letter is issued, the lender’s clock starts. Request an extension in writing well in advance if needed — lenders are not always accommodating.
Deficiency judgment risk. Florida law (F.S. §702.06) allows lenders to pursue deficiency judgments after a short sale unless waived in writing. Ensure the approval letter explicitly waives the deficiency, or consult a real estate attorney.
Tax implications. Forgiven debt can be treated as taxable income under federal law. Sellers should consult a CPA regarding the Mortgage Forgiveness Debt Relief Act and any applicable Florida exemptions.
HOA and condo association liens. In Florida, HOA assessments can create independent liens. These must be addressed separately from the mortgage and can complicate or delay closing.
The Bottom Line
Short sales require patience, organization, and clear communication among all parties. The FAR/BAR Short Sale Addendum provides a solid legal framework that protects buyers and sellers alike — but only when it’s properly executed and the process behind it is managed with care. Work with a Realtor® and, where appropriate, a Florida real estate attorney experienced in short sales to give the transaction the best chance of reaching the closing table.
If you have questions on short sales or any other real estate matters, please do not hesitate to reach out to your local, trusted real estate attorney.
