What is a Short Sale?
In order to sell a home, the owner must be able to pay off their mortgage and all expenses related to the home sale.
These expenses typically include:
- Primary mortgage
- Home equity line or 2nd mortgage
- Real estate commission
- Title company fees - typically $250-400 in the St. Louis area
- Sewer fees
- Subdivision fees and special assessments
- Real estate taxes - the owner is responsible for Jan. 1 through the closing date
- Municipal and gas company repairs
- Liens placed against the house for prior work
When the value of the home has dropped so that the sale price is LESS than the total of the above fees, the only way for a sale to happen is for the bank(s) holding the mortgages to agree to take less than the mortgage payoff at closing.
Example: Let's say a house was purchase for $250,000 and had an intial mortgage of $225,000 with a $25,000 down payment. After a few years of paying monthly mortgage payments, the principal that is owed is down to $220,000.
However, the value of the home has dropped to $200,000. The real estate commission and other fees (listed above) add up to $15,000. With a sale price of $200,000 and fees of $15,000, the seller will only get $185,000 from the sale. This is not enough to pay off the $220,000 that is owed to the bank.
Either the bank agrees to accept the $185,000 as payment in full, or to accept it but require the seller to sign a promissary note to pay back some of the shortfall, or the house can't be sold.
If a homeowners' circumstances have changed and they can't afford to keep making the mortgage payments but they can't sell because the house isn't worth enough to cover all of the costs, then the house either ends up in foreclosure or they can try to get approved for a short sale.
Everyone isn't eligible for short sales. There must be a hardship such as a job loss, divorce or high medical bills that resulted in the owner not being able to pay the mortgage.
Banks don't approve short sales just because you want to sell and can't sell for enough to cover all of the costs. Short sales are approved to prevent foreclosure. Since the banks take a much bigger loss when they foreclose on a home than when they approve a short sale, they are willing to do it if they think it is in their financial best interest.
Short Sales are Good Deals for Buyers:
Home buyers who are looking for a good deal often go in search of a foreclosure to purchase. However, buying a foreclosure come with real risks.
Homeowners who have lost their home to the bank are often angry. They often strip the house of everything of value. Many foreclosured homes are missing standard appliances, ceiling fans and even cabinets.
Homeowners about to lose their home to the bank also stop trying to keep the home in good condition. They don't clean up spills which ruin the carpeting. They rip items off the walls, resulting in torn drywall. They leave their old junk in the house rather than removing it like they would if they were selling. They sometimes even purposefully sabotage the systems...angry at both the bank and the future homeowner.
In comparison, owners of short sales are working hard to try to sell their home to avoid foreclosure. While both short sales and foreclosures are purchased as-is with the sellers not performing any repairs, private owners of short sales are desperately trying to avoid foreclosure and they aren't going to strip the house of the stove and built-in microwave. They aren't going to trash the house when they are moving their furniture. They want a buyer to love the house and make an offer.
The only downside to a short sale is that the banks respond very slowly, so it can take a few months to confirm that the mortgage holder will approve the sale price.
But for buyers who are flexible about when they close on their new home and some patience, a short sale is a great opportunity to buy a house at a distressed price that is in much better condition than a foreclosure.
Home on 3 Acres for Sale: 8360 John McKeever Drive
If you like the idea of living in the country with acres of woods, you should take a look at the home at 8360 John McKeever Drive, House Springs, MO 63051.
The price was just reduced to $194,000.
This 3 bedroom, 2.5 bathroom home has a unique multi-level floor plan. You enter the home by stepping into the chariming 2 story foyer. Step up a half flight of curved staircase and you are on the main floor featuring a large living room and dining room with wood floors. There is also a large kitchen with breakfast bar seating and access to the huge deck. Up a few steps you'll find the master suite plus 2 more bedrooms and a 2nd full bathroom. Down a few steps from the main level you step into the family room with wood burning stove, half bathroom, entrance to the unfinished basement and garage, and access to the patio.
This home is totally unique with old world charm that you would find in a historic home, but all of the conveniences you want when living surrounded by wildlife.
Located in Rockwood School District, this house is in unincorporated Jefferson County. It has a House Springs mailing address but is only 10 minutes from Eureka's Hwy 44 and Hwy 109 intersection.