What is a Short Sale?
With many St Louis homeowners finding they owe more to the bank than the fair market value of their home, short sales have become more prevalent in real estate listings of most areas of the United States. A short sale occurs when the homeowner’s lender agrees to accept less than the outstanding balance on the mortgage as payment in full. While short sales are tools used to avoid foreclosure in many circumstances, homeowners who owe more they can get when they sell their home use short sales when they need to relocate for a job. Short sales have advantages for both the buyer and seller of a property, though the transaction differs from a traditional St Louis real estate sale.
The Short Sale Process for Sellers in St. Louis
A homeowner considering selling their St Louis home through short sale process needs to do some homework to prepare a packet to request permission for a short sale from all of the lienholders of the home. For a bank to approve a short sale, the seller must demonstrate the following:
The seller has some type of financial distress prohibiting the seller from fulfilling the terms of the mortgage agreement. Examples of circumstances for which a bank will approve a short sale include unemployment, divorce, significant disability, and relocation for employment.
The seller then needs to determine the current market value of their home based on the sales price of comparable homes that recently sold in their St Louis neighborhood. Additionally the seller needs to calculate the equity he or she has in the home and the cost the seller will incur at closing.
Once the seller had determined the equity, the closing costs, and the fair value of the home, the next step is to compare the value of the home, the equity and closing costs. If the fair market value is less than closing costs, then the lender is likely to approve a short sale.
Prior to listing the home, the seller must contact the lender to get approval to list the home from the lenders. Many people find it useful to start with the loss mitigation department to expedite the process.
The Short Sale Process for Buyers in St. Louis
Purchasing St Louis real estate and homes through a short sale often means buyers can get a home for a bit less than comparable homes in a particular neighborhood. Just as a seller has to do some preparation prior to listing a short sale, the buyer needs to do homework prior to making an offer on a property listed as a short sale.
The buyer of the property needs to have a letter for pre-approval from their lender since the seller’s bank will require a pre-approval. Some seller’s banks will also have to pre-approve a buyer according to their lending standards so it is important to have your financial information in order.
When making an offer on a home offered as a short sale, check similar properties in the area that have recently sold to avoid overbidding or making an offer so low the bank will not consider it.
Be prepared to wait. While banks have started to process short sales more quickly than a year ago, it can still take as long as three months before the seller’s lender accepts or rejects the offer.
