Short Sales in 2026? What They Are, When They Happen, and What the Twin Cities Data Is Actually Showing

Hello everyone — Dale here with Woodbury Real Estate Group. In this video I’m reacting to what I was seeing on TikTok about Florida’s market and the idea that instead of a “crash,” they may see more short sales.

So I wanted to double-check what’s happening here — especially in the Twin Cities / Washington County — and explain what a short sale is for anyone who hasn’t dealt with one before.

Quick note like I said in the video: I’m sharing this as a real estate broker’s perspective, not as legal or tax advice.

First: What Is a Short Sale?

A short sale happens when a homeowner needs to sell, but the sale proceeds won’t fully cover:

• the mortgage payoff
• plus typical selling costs (agent commissions, closing costs, etc.)

It usually comes up when:

• someone can’t afford the payment anymore
• divorce, death, job loss, business collapse, relocation, etc.
• or they bought recently and don’t have enough equity to exit cleanly

Example (Simplified)

Let’s say you owe $500,000 on a house.

But:

• new construction in your neighborhood is selling for $480,000
• and you’d need to pay selling costs (often easily 8–10% once you factor commission + concessions)

Even if you sold for $480K, you might still need roughly $50K out of pocket just to close.

If you don’t have that cash, a short sale becomes a possible path — where the lender agrees to take less than what’s owed.

Why Florida Might See More Short Sales (and Why Minnesota Is Different)

The TikTok point you referenced was:
Florida had a massive boom (especially 2020–2023), and now people who bought late in that cycle may not have enough equity to sell — especially if builders are offering better financing, lower prices, or incentives.

Your Minnesota comparison:

• we didn’t have the same influx of people
• we weren’t building at the same runaway pace
• so we’re less likely to see a Florida-style wave purely from overbuilding pressure

That doesn’t mean short sales can’t happen here — they can — but the drivers are more often:

• personal financial stress
• life events
• business setbacks
  …rather than a statewide flood of oversupply.

How a Short Sale Works (Real-World Process)

You described the classic short sale workflow:

1. Contact the lender and notify them you’re pursuing a short sale
2. List the home and secure an offer
3. Submit the offer to the bank for approval
4. The lender often rejects or counters the first offer
5. Because the timeline can be long, you try to protect the deal by gathering:
   • a primary offer
   • and backup offers
6. If needed, you go back to market once the lender confirms an acceptable price

Why Buyers Can Get “Burned”

Historically, short sales were slow. You said it could take long enough that:

• the first buyer might walk
• which is why you’d warn buyers upfront and keep backup offers ready

(You also noted you haven’t had to do one since around 2016, because for years the market made it easier to sell normally.)

The Two Big Downsides Sellers Need to Understand

1) Credit Impact (Missed Payments)

Short sales usually occur when people are already behind, and missed payments do hit credit.

2) Taxes Can Get Complicated

You raised a major point that many homeowners don’t understand:

If a lender forgives debt (the difference between what you owe and what they accept), that forgiven amount can be treated as taxable income in some situations.

You mentioned that rules changed around 2016, and that tax treatment can still be an issue depending on the situation and current law.

So if someone is considering a short sale, it’s critical to also talk to:

• a tax pro / CPA
• and the lender
  to understand what the forgiven amount could mean.

(You also gave real-world examples from the old crash era where huge losses were common — $700K–$800K homes selling for $400K — which made the “forgiven debt” problem massive.)

What the Local Data Shows: No Sign of a Crash-Style Wave

You pulled up the Twin Cities lender-mediated chart (short sales + foreclosures + lender-mediated activity) and made the key point:

✅ You’re not seeing a meaningful uptick.

Yes, if you zoom into a short timeframe (like 3 years), it can look like it’s climbing.

But when you zoom out (10 years+), it looks like:

• lender-mediated activity has always been present at a baseline level
• even during low-rate years (like 2020), there were still people who walked away for personal reasons

The real crash signal would look like:

• sustained rapid increases
• sharp upward slope over consecutive six-month periods
• a move toward a massive spike like 2008–2010

And your conclusion was:

✅ We are nowhere near that.

You gave a great “what a crash would look like” description:
If the number started accelerating in big steps every six months, that would be alarming.

But what you’re seeing now looks closer to “normal background level,” not a wave.

Bottom Line

Short sales aren’t “back” in a crash-style way — at least not based on what you’re seeing in the Twin Cities data.

But short sales can still happen in individual situations, especially for people who:

• bought late in the recent cycle
• have thin equity
• are competing against builder incentives
• or had a major financial/life event

If someone is stuck and needs options:

• short sale may be one route (pre-foreclosure style)
• but they need to understand the time, credit, and tax implications

And as you said: if you’re in that position, reach out and we can talk through the options and the process.