I am sure they were all stunned. They were probably thinking, "Sin? Who mentioned sin?" The poor paralyzed guy must've been thinking, "Are you blind and deaf, it's my legs – I can't move them – I need them fixed, not sin". The onlookers even asked “who is this guy that he thinks he can forgive sin?”
What great lessons here. Jesus knows that every person He heals – it is only temporary, because even though physically healed, in case you haven't noticed – every one of them still dies! So Jesus in this account was trying to show the more important "healing". Physical healings are temporary; but the forgiveness of sin, the spiritual healing, is eternal. What a God we serve! Endure the fire...it's producing pure gold!