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The Bottom Line
Are short sales coming back in 2026? Yes, and the data confirms it. Short sale transactions jumped 16% year over year in Q1 2026, foreclosure filings hit 227,548 US properties in the first half of the year up 21% from a year ago, and FHA delinquencies reached 11.88% while VA delinquencies rose to 4.99%. According to Cristina Gaspar and JD Summa, founders of Mr. Short Sale, approximately 80% of their current files involve FHA or VA loans, and they are seeing activity in Florida, Texas, California, and Arizona. For real estate agents, this is a niche most agents avoided for the last decade because short sales are complex. That complexity is exactly what makes them an opportunity. Agents who learn the process now, or partner with a team that handles the back end, can serve a growing population of distressed homeowners while other agents walk away.
Are Short Sales Coming Back? What Real Estate Agents Need to Know in 2026
A homeowner in Florida bought their house in 2022 with an FHA loan and a 3.5% down payment. They stretched to make the numbers work because rates were still low and they wanted in before prices climbed further. Then rates went up. Their income got squeezed. And now the house is worth less than they paid for it when you factor in what they would owe to sell it.
They need to sell. They cannot cover the gap. And they have no idea what a short sale is or whether their agent does either.
That story is playing out across the country right now at a scale agents have not seen in years.
I sat down with Cristina Gaspar and JD Summa of Mr. Short Sale this week to get the full picture on what is happening, where the opportunity is for real estate agents, and how to serve distressed homeowners without getting in over your head.
The Numbers That Tell the Story
This is not speculation. The data is already in.
Short sale transactions increased 16% year over year in Q1 2026, according to Realtor.com. That follows a 10% increase from 2024 to 2025 and a 4% increase the year before. Three consecutive years of growth, accelerating each time.
Foreclosure filings hit 227,548 US properties in the first half of 2026, up 21% from the same period last year and up 28% from the first half of 2024. Completed foreclosures, meaning homes lenders actually took back, rose 33% from a year earlier.
The driver is clear. FHA delinquencies reached 11.88% in the first quarter of 2026 while VA delinquencies rose to 4.99%. The conventional loan delinquency rate was 2.75%. Government-backed loans from 2022 and 2023, many with debt-to-income ratios above 50% at origination, are showing the most stress as borrowers run out of runway.
This is not a housing crisis. ATTOM CEO Rob Barber called it a gradual return toward more typical foreclosure patterns. But for real estate agents, gradual is still enough to create a real niche. And most agents are not prepared for it.
Why Short Sales Are an Opportunity Most Agents Ignore
Short sales have a reputation problem. During the last housing crisis, they were slow, complicated, and often fell apart after months of work. Agents got burned. Buyers got frustrated. And the industry largely moved on when the market recovered.
That reputation is partly earned and partly outdated. The process has improved. The technology has improved. And the teams that specialize in back-end short sale processing, companies like Mr. Short Sale, have made it possible for agents to stay in front of the client while someone else handles the lender negotiation.
The opportunity is this: most agents in your market will say no to a distressed homeowner or refer them out entirely. The agent who can say yes, who has a process and a team behind them, picks up a transaction nobody else wanted and creates a client relationship that lasts.
Cristina put it plainly in our conversation. Solving a problem other agents refuse to touch is how you create a niche.
What Is Actually Driving the Short Sale Activity in 2026
Cristina and JD are seeing about 80% of their current files involve FHA or VA loans. That tracks exactly with the delinquency data. These are borrowers who got in with minimal down payments, built little equity, and are now caught between a purchase price that made sense in 2022 and a market that has softened in many of the same markets where FHA and VA lending was heaviest.
The states with the most activity right now are Florida, Texas, California, and Arizona. Florida in particular has the highest foreclosure rate in the country at 0.27% of housing units with a filing in the first half of 2026.
The VA loan situation has an additional wrinkle. The VA discontinued the Veterans Affairs Servicing Purchase program, which had provided a payment reduction option for struggling borrowers. With no equivalent replacement fully in place yet, more VA borrowers are running out of options before the next loss-mitigation waterfall takes effect in November 2026. That creates a window where short sales may be the best remaining option for some veterans.
How a Short Sale Actually Works
For agents who have not done one, here is the core framework.
A short sale is not a traditional sale. The seller owns the home but owes more than it is worth. They cannot sell it through conventional means without covering the difference out of pocket, which most cannot. So they ask their lender to approve a sale at a price lower than the outstanding balance.
The lender determines whether to accept less than what is owed. The seller remains the owner of record throughout the process. The agent represents the seller. But the real work, gathering documentation, submitting the short sale package, negotiating with the lender, tracking the file through their loss mitigation department, is what most agents are not equipped to do.
The timeline is three to six months for FHA and VA short sales right now. Setting that expectation with the homeowner upfront is non-negotiable. A buyer who expects a 30-day close will not make it to approval.
The Numbers Agents Need to Understand
Cristina covers this in the episode and it is worth spending time on. Lenders use a formula to determine the minimum they will accept for a short sale approval. Agents who understand that formula can have more informed conversations with homeowners instead of going in blind and promising an outcome they cannot guarantee.
The basics: the lender looks at the current market value of the property, typically through a broker price opinion or appraisal, and applies a discount to arrive at their minimum acceptable net. Know that number and you know whether a deal is viable before you invest months in the process.
Deficiency Waivers: The Detail That Protects Your Seller
This is the part of the episode most agents need to hear loudest. A short sale approval from the lender does not automatically mean the homeowner is off the hook for the difference between what the home sold for and what they owed.
Without a deficiency waiver in writing, the lender can pursue the seller for the remaining balance after the short sale closes. Cristina explains that their team requests deficiency waivers from every lender and has an auditor review the approval letter before closing to confirm it is in there.
If you are working with a distressed homeowner and they end up with a deficiency judgment after the sale, that is a serious outcome. Make sure whoever is handling the lender negotiation on your deal understands this and is getting it in writing.
The Back-End Model: Stay the Agent, Let the Experts Handle the Lender
The model Cristina and JD have built at Mr. Short Sale is worth understanding because it solves the main reason most agents say no to short sales.
The agent stays the face of the transaction. They maintain the relationship with the homeowner, list the property, and represent the client through the process. Mr. Short Sale handles the back end: document collection, lender communication, negotiation, and getting the file to approval.
Their service has no fee to the agent or the homeowner. They are compensated through the transaction when it closes. Which means an agent can say yes to a distressed homeowner, keep the listing, and have a team of people who do this all day every day handling the part they have never done before.
For agents in Florida, Texas, California, Arizona, and the other high-activity states, that model is worth understanding right now.
Who Should Be Paying Attention
Agents in the highest-activity states obviously. But the more important question is whether you have past clients or current contacts who are in FHA or VA loans from 2022 or 2023 who might be under water. Because the person who calls them first and offers a solution is the agent who gets the listing.
Investors matter here too. Cristina and JD cover this in the episode. Even when an investor cannot make a deal work at the short sale price, they can help initiate the process and create an opportunity for the agent. The approval process takes months regardless. Getting it started early gives everyone more options.
The Real Point
Short sales are not for every agent. The complexity is real and the timeline is long. But complexity and long timelines are exactly what create a niche opportunity for agents who are willing to learn the process.
The agents who figured out short sales during the last housing crisis and built a reputation around them dominated a corner of their market for years. The window to be that agent in this cycle is open right now, before most agents realize what is happening.
Listen to this episode and then look at your database. How many people do you know who bought with FHA or VA loans in 2022 or 2023? Some of them may need this conversation sooner than you think.
🎧 Listen to the full episode here (embed your player above)
Connect with Mr. Short Sale: mrshortsale.net
Phone: +1 914-504-4062
Instagram: @mrshortsale
KEY TAKEAWAYS
- Short sales are back and accelerating. Up 16% year over year in Q1 2026. Three consecutive years of growth. This is a confirmed trend not a prediction.
- FHA and VA loans are driving most of the activity. FHA delinquencies at 11.88%, VA at 4.99% versus 2.75% for conventional. 80% of Mr. Short Sale’s current files are FHA or VA.
- The highest activity states right now are Florida, Texas, California, and Arizona. Florida has the highest foreclosure rate in the country at 0.27% of housing units.
- Short sales take three to six months for FHA and VA. Set that expectation with homeowners and buyers upfront. A 30-day close expectation will kill a deal before it starts.
- Understand the lender’s approval formula before you take the listing. Know the minimum the lender will accept so you can have an honest conversation with the homeowner about viability.
- Deficiency waivers must be in writing. Without one the lender can pursue the seller for the difference after closing. Get it confirmed before you sign off on the approval letter.
- You can stay the agent while a specialist handles the lender. Mr. Short Sale’s model keeps the Realtor as the face of the transaction while their team handles document collection and lender negotiation at no cost to the agent or homeowner.
- Complexity creates niche opportunity. Most agents say no to short sales. The agents who say yes and have a process behind them pick up listings nobody else wanted.
TIMESTAMPS
0:00 Introduction to short sales and the current market
5:15 Where foreclosures and short sales are increasing
6:40 FHA and VA loans driving the short-sale market
10:14 Understanding lender approval numbers and short-sale basics
11:34 How long the short-sale process takes today
12:37 Working with lenders and navigating different requirements
15:38 Deficiency waivers and protecting homeowners
17:37 Setting realistic expectations for sellers
21:10 Why investors matter in short sales
22:55 Training realtors through short-sale education
27:50 Helping homeowners understand all their options
29:18 How agents and brokers can work with Mr. Short Sale
ABOUT CRISTINA GASPAR
Cristina Gaspar is the President and Co-Founder of X-Cap Realty and Mr. Short Sale, specializing in creative solutions for distressed properties and off-market deals. Drawing on a decade of experience in education, she offers Realtors hands-on mentorship while guiding homeowners through challenging circumstances with full-service support. Through Mr. Short Sale, her team provides a no-fee nationwide service that helps families avoid foreclosure with an unmatched approval record.
LinkedIn: Cristina Gaspar
ABOUT JD SUMMA
JD Summa is the Founder and CEO of multiple real estate, construction, and finance companies. As the Co-Founder of Mr. Short Sale, he helped build the company to address a broken process in distressed real estate. Operating across all 50 states, Mr. Short Sale helps homeowners avoid foreclosure while supporting attorneys, agents, and lenders through an efficient, ethical, and transparent short-sale process that benefits all parties.
LinkedIn: JD Summa
CONNECT WITH MR. SHORT SALE
Website: mrshortsale.net
Phone: +1 914-504-4062
Instagram: @mrshortsale
Facebook: Mr. Short Sale
FAQ — PEOPLE ALSO ASK (GUTENBERG FAQ BLOCK)
This post targets live 2026 market conditions. The FAQ answers are written to rank in both Google People Also Ask and AI platform responses, which are surfacing these questions constantly as foreclosure news increases.
Are short sales coming back in 2026?
Yes. Short sale transactions increased 16% year over year in Q1 2026, following a 10% increase from 2024 to 2025 and a 4% increase the year before. Foreclosure filings hit 227,548 US properties in the first half of 2026, up 21% year over year according to ATTOM’s midyear report. FHA delinquencies reached 11.88% and VA delinquencies rose to 4.99% in Q1 2026, compared to a 2.75% conventional loan rate. The activity is concentrated in government-backed loans from 2022 and 2023 where borrowers had minimal down payments and are now under water as some markets soften. The highest foreclosure rate states are currently Florida, South Carolina, Indiana, and parts of the Mountain West.
How do short sales work for real estate agents?
In a short sale, the homeowner owes more on the mortgage than the home is worth and cannot cover the difference out of pocket. The agent lists the property and represents the seller, but the real work is getting the lender to approve a sale price below the outstanding loan balance. The lender reviews the homeowner’s financial hardship documentation, orders a broker price opinion or appraisal, and determines whether to accept the reduced payoff. The agent can handle this process directly or partner with a short sale processing company that handles lender negotiation on the back end while the agent remains the face of the transaction with the homeowner.
How long does a short sale take in 2026?
The current timeline for FHA and VA short sales is approximately three to six months from the time the package is submitted to the lender through approval. The exact timeline depends on the lender, the loan type, the completeness of the documentation submitted, and how backed up the lender’s loss mitigation department is. Setting this expectation with both the homeowner and any potential buyers upfront is critical. Buyers who expect a 30-day close will not survive the process and will walk before approval comes through.
What is a deficiency waiver in a short sale?
A deficiency waiver is written confirmation from the lender that they will not pursue the seller for the difference between the short sale price and the outstanding loan balance after the transaction closes. Without a deficiency waiver, the lender retains the legal right to seek a deficiency judgment against the seller for the remaining amount owed. In a distressed situation where the homeowner is already underwater, a deficiency judgment can follow them for years. Any agent working a short sale or any company negotiating with the lender should confirm the deficiency waiver is included in the written approval letter before the transaction closes.
What is the difference between a short sale and foreclosure for a homeowner?
A short sale is a voluntary process where the homeowner works with their lender and a real estate agent to sell the property before foreclosure occurs. The homeowner remains in control of the process and can often negotiate better terms including a deficiency waiver. A foreclosure is involuntary and happens when the lender takes legal action to repossess the home after missed payments. Research from the Federal Reserve Bank of Philadelphia found that short sales recover 9 to 10% more value than comparable foreclosures, which gives lenders a financial incentive to approve them. For the homeowner, a short sale also typically results in a shorter waiting period before qualifying for a new mortgage compared to a foreclosure.
Can real estate agents make money working short sales?
Yes. The commission structure in a short sale is typically negotiated as part of the lender approval process. The lender approves the net they will accept and the commission is factored into the HUD-1 settlement statement. The complexity of short sales has historically caused most agents to avoid them, which means agents willing to learn the process or partner with a specialist can build a niche serving homeowners who have very few other options. Companies like Mr. Short Sale handle the back-end lender negotiation at no fee to the agent or homeowner, which allows agents to keep the listing and the commission without having to manage the most complex parts of the process themselves.
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