Buying St Louis Short Sale Homes

What is a 'Short Sale?'

A Short Sale takes place when homes are sold for less than the bank payoff, and the home seller does not have the funds to make up the difference.  

Contrary to the ideas of some, when any home with a mortgage is sold, the note that secures the deed of trust must be released by the bank.  This is an industry way of saying, THE BANK HAS TO GET THEIR MONEY.   If the sale is for less than the loan payoff, and the seller can't bring enough money to closing to pay the loan off, then a short sale must take place.   

The Good, The Bad, and the Ugly

Good things about short sales, is that since 2007, banks have worked to simplify the process and allow for more short sales to take place.  Also, in some cases, banks have taken a more liberal definition of what constitutes a 'hardship' than they once did.  Also, as a result of legislation and the National Mortgage Settlement, some banks are required to allow for more short sales.   

Bad things about short sales from a buyer perspective is the time it takes to complete a sale, many Realtors don't know how to handle them,  and the fact that negotiations usually don't take place.  

• Short sales are unpredictable and lengthy, contrary to the normal 'home buying cycle'.  The time it takes to get a bank response varies with each deal, and each bank.  There is no "normal" length of time because all banks have their own way of handling things.
• Short sales are best handled when EVERY professional involved knows how to handle short sales.  If the buyer's agent has experience, but the seller's agent doesn't, the process can be rocky and vice-versa.
• Buyer's like to negotiate.  They like to make lower offers and see what they can get the seller to accept.  Short sales don't usually allow for that.  Offers are made, usually accepted by the seller, then sent off to the bank whether or not they will be ultimately accepted.

The ugly part of buying short sales is the uncertainty and lack of consistency.  Once a seller has accepted an offer and sent it to the bank, it could take one or more months for the banks to accept the offer, and several variables exist to complicate the process.  The bank may accept the offer IF the seller is willing to contribute additional funds, which could end up killing the deal.  Some times, buyers wait for several months, only to find out that they can't buy and the home is foreclosed on.  Even if the offer is only slightly off, sometimes it is simply rejected by the bank, only to be sold for the same or close to the same price later.  Sometimes there is no 'rhyme or reason' to how short sale negotiations take place.