After Short Sale Approval: What the Letter Must Say and What Happens Before Closing

A short sale approval is a letter with conditions and a deadline, not a finish line. Between the letter and the closing table, four things can still go wrong: the terms, the timeline, the junior liens, and the buyer. This page walks through each in the order they come up.

If you are still assembling the package, start with how to write a short sale hardship letter and the short sale documents checklist.

Read the letter before anyone celebrates

Approval letters are short and dense. Five terms decide whether the deal closes and what you owe afterward:

1. Approved price or minimum net. Some letters approve a sale price; others approve a minimum amount the lender must receive after costs. If the buyer later asks for a repair credit, a net-based approval may not absorb it.
2. Closing deadline. On a Fannie Mae loan the sale must close within 60 calendar days of the servicer’s approval unless Fannie Mae approves an extension in writing (Servicing Guide D2-3.3-01). Other investors print their own dates. Missing the date means a new approval, and often a refreshed opinion of value.
3. Allowed costs. The letter lists what the lender will pay from proceeds: commissions, title, recording, prorated taxes, sometimes a home warranty or a repair. Anything not listed is paid by the buyer, the agent, or you.
4. Junior lien payments. Fannie Mae caps payments to subordinate lienholders at $6,000 in total, and requires that the payment buy a lien release plus a full release of your liability (D2-3.3-01). If your second mortgage wants more, the gap has to come from somewhere before closing.
5. The deficiency sentence. The line that says whether the lender releases you from the remaining balance, or reserves the right to collect it, or requires a promissory note. This is the most important sentence in the letter. See the next section.

Ask for any of the five to be corrected before you sign the acknowledgment. Letters can be revised; recorded deeds cannot.

The release: what “approved” does not mean

Florida permits a lender to pursue the shortfall after a sale. For owner-occupied residential property the amount is capped at the outstanding debt minus the fair market value on the date of sale, and granting it is within the court’s discretion (Fla. Stat. 702.06). A short sale does not start the one-year clock that applies after a foreclosure sale (Fla. Stat. 95.11(6)(g)), so the only thing that ends your exposure is the written release.

On a Fannie Mae loan without mortgage insurance, the servicer must release you from the deficiency at closing, and may use the Deficiency Waiver Agreement, Form 189 (D2-3.3-01). On loans with mortgage insurance, the insurer may ask for a cash contribution or a note as the price of the release. On FHA loans, the pre-foreclosure sale program is defined as a sale in which lienholders release their liens and forgive the deficiency balance (HUD Handbook 4000.1). Portfolio and private-label loans vary, and the letter is your only evidence.

If the letter reserves the deficiency and you are asked to sign anyway, that is the moment to slow down, not after closing. Our page on the Florida deficiency judgment explains what a reserved balance can become.

The 60 days: what has to happen

Approval starts a clock, and the buyer’s side of the transaction has usually been idle while the lender reviewed. In the approval window:

• Inspection and repairs. Short sales close as-is. The buyer inspects, and if repairs are demanded, the lender’s allowed-cost list decides whether anyone can pay for them.
• Buyer financing. The buyer’s lender orders its own opinion of value and underwrites. A low number here can reopen the price.
• Title and payoffs. The title agent orders written payoffs from every lienholder named in the approval and confirms association estoppel amounts. Under Florida law a buyer is jointly liable for certain unpaid condominium or HOA assessments (Fla. Stat. 718.116(1)(a) and 720.3085(2)(b)), so the association figure is settled before closing, not after.
• Occupancy. You arrange your move. If relocation assistance is part of the approval, it is paid at closing, itemized on the settlement statement, and reduced by any relocation money you receive from another source (D2-3.3-01). See short sale relocation assistance.

If the buyer walks, the approval normally dies with the contract. A replacement offer restarts the servicer’s review, so keeping the buyer engaged during the wait is not courtesy, it is deal protection.

Closing day and the 48 hours after

The settlement statement is drafted to match the approval letter line by line: price, allowed costs, junior lien payments, your contribution if any, relocation assistance if any, and the net wired to the lender. On a Fannie Mae loan the servicer must review the settlement statement within 48 hours of closing for accuracy and compliance (D2-3.3-01). Discrepancies at that stage delay the release of the lien, so the closing agent should confirm the figures with the servicer before funding.

You sign the deed and the settlement statement, hand over keys, and leave the property in the condition the approval requires.

What arrives in the weeks and months after

• The recorded release. A satisfaction or release of mortgage, recorded in the county where the property sits. Keep a copy. The full post-closing checklist is on what happens after a short sale closes.
• Credit reporting. The account reports as settled for less than the full balance. How long that weighs on your score, and when you can buy again, is on short sale credit and buying again.
• Form 1099-C. If the lender canceled $600 or more, it reports the amount to the IRS and to you the following January. Whether it is taxable in 2026 is covered on short sale taxes and the Form 1099-C.
• The promissory note, if you signed one. Payments begin on the schedule in the note. Calendar the first one.

Keep the approval letter, the settlement statement, and the recorded release together. Between the credit report and the tax return, you will need all three.

This page is general information for Florida homeowners and is not legal or tax advice.