What Is a Short Sale in Missouri?

Short sales are a real estate transaction when a homeowner sells their property for less than the amount owed on their mortgage. This complex process involves negotiations with the lender and potential financial implications for the homeowner and the buyer.

This guide will explore the basics of short sales and provide an overview of the key steps involved. You’ll also learn how to sell your house fast in St. Louis, Missouri to avoid foreclosure or bankruptcy.

What is a Short Sale?

In real estate, a short sale refers to a transaction where a homeowner sells their property for less than the outstanding balance on their mortgage. It is typically pursued as an alternative to foreclosure, which can have more severe consequences for both the homeowner and the lender.

Compared to a traditional sale, where the homeowner sells the property for an amount equal to or higher than the mortgage balance, a short sale requires the lender’s approval. The lender must agree to accept less than what is owed on the mortgage for the sale to proceed.

Homeowners may opt for a short sale for various reasons. Some common factors include

  • Financial hardship such as job loss or medical expenses
  • Significant decrease in property value
  • Inability to keep up with mortgage payments.

By pursuing a short sale, homeowners hope to avoid foreclosure and minimize the negative impact on their credit score.

Missouri Short Sale Laws and Regulations

The state of Missouri has specific laws and regulations governing short sales. Both homeowners and buyers must understand these regulations to ensure a smooth and legal transaction.

One important aspect of Missouri short sale laws is the requirement for the homeowner to demonstrate financial hardship. It is a crucial step in the short sale process and provides documentation supporting the hardship claim. Examples of financial hardship include job loss, divorce, medical emergencies, or a significant decrease in income.

Also, Missouri law requires the lender to provide written approval for the short sale. This approval should outline the terms and conditions of the sale, including the amount the lender is willing to accept as payment in full. Homeowners must work closely with their lender and a qualified real estate agent familiar with Missouri short sale laws to ensure compliance.

The Short Sale Process

The short sale process typically consists of several key steps. Understanding each step can help homeowners navigate the process more effectively.

Step 1: Financial Hardship

The first step in a short sale is for the homeowner to demonstrate financial hardship. It involves gathering relevant documentation, such as bank statements, pay stubs, tax returns, and any other proof of their financial challenges. It is important to be thorough and provide accurate information to support the hardship claim.

Step 2: Contacting the Lender

Once the homeowner has gathered the necessary documentation, they should contact their lender to discuss the possibility of a short sale. It is crucial to be prepared for this conversation by having all the relevant information at hand. The homeowner should explain their financial situation and express their desire to pursue a short sale as an alternative to foreclosure.

Step 3: Listing the Property

After obtaining the lender’s approval to proceed with a short sale, the homeowner should work with a real estate agent to list the property on the market. It is important to price the property in line with its current market value to attract potential buyers. The real estate agent will help market the property and handle inquiries from potential buyers.

Step 4: Receiving Offers

Once the property is listed, potential buyers will start submitting offers. With the guidance of their real estate agent, the homeowner will review these offers and consider their options. It is important to carefully evaluate each offer and assess whether it meets the lender’s requirements for a short sale.

Step 5: Negotiating with the Lender

Upon receiving an acceptable offer, the homeowner and their real estate agent will negotiate with the lender to obtain approval for the sale. This involves submitting the offer and supporting documentation to the lender for review. The lender will assess the offer and may request additional information or negotiate the terms of the sale.

Step 6: Closing the Sale

Once the lender approves the short sale, the closing process can begin. It involves finalizing the sale agreement, coordinating with the buyer’s lender, and completing all necessary paperwork. Working closely with a real estate attorney or closing agent is important to ensure a smooth and legally compliant closing process.

Benefits and Risks of Short Sales

Short sales offer several benefits for both homeowners and buyers. However, there are also potential risks involved that need to be considered.

One of the main benefits of a short sale for homeowners is avoiding foreclosure. Foreclosure can have significant negative consequences, including damage to credit scores and the potential for deficiency judgments. By pursuing a short sale, homeowners can mitigate these risks and potentially preserve their creditworthiness.

Another benefit of a short sale is the opportunity to sell the property and settle the mortgage debt. It provides a sense of closure and relieves the financial burden on the homeowner. Additionally, depending on the terms negotiated with the lender, the homeowner may be able to walk away from the sale without owing any additional money.

Alternatives to a Short Sale

While a short sale can be a viable option for homeowners facing financial hardship, there are alternative solutions that should be considered. Here are some alternatives to a short sale:

Cash Home Sale

A cash home sale involves selling the property directly to a cash buyer, often an investment company or real estate investor. It provides a quick and hassle-free way to sell a distressed property without lender approval or the traditional listing process. However, the sale price may be lower than the market value, and the homeowner may not have the opportunity to negotiate terms.

Loan Modification

A loan modification involves renegotiating the mortgage terms with the lender to make the payments more manageable for the homeowner. It can be done by adjusting the interest rate, extending the loan term, or reducing the principal balance. However, not all lenders offer loan modification programs, and the homeowner must demonstrate the ability to make the modified payments.


Refinancing involves replacing the current mortgage with a new loan with more favorable terms. It can help homeowners secure a lower interest rate or adjust the loan term to reduce monthly payments. However, refinancing may not be an option for homeowners with poor credit or a significant decrease in property value.

Forbearance Agreement

A forbearance agreement is a temporary solution that allows homeowners to suspend or reduce their mortgage payments for a specific period. It provides temporary relief for homeowners facing financial hardship. However, it is essential to understand that the suspended payments will need to be repaid in the future, and the homeowner must demonstrate the ability to make the payments.

Deed in Lieu of Foreclosure

A deed instead of foreclosure involves voluntarily transferring the property title to the lender to avoid foreclosure. It is an alternative for homeowners who cannot sell the property through a short sale or other means. However, it may still hurt the homeowner’s credit score and not eliminate the mortgage debt.

Short Sale vs. Cash Home Sale: Which is Best for Selling Your Distressed House?

Short Sale

A short sale involves selling the property for less than the outstanding balance on the mortgage with the lender’s approval. It requires negotiations with the lender and may involve a longer closing process than a cash home sale. However, a short sale allows one to settle the mortgage debt and avoid foreclosure.

Cash Home Sale

A cash home sale involves selling the property directly to a cash buyer without lender approval. It provides a quick and hassle-free way to sell a distressed property. However, the sale price may be lower than the market value, and the homeowner may not have the opportunity to negotiate terms.

Choosing between a short sale and a cash home sale depends on the homeowner’s specific circumstances and goals. A short sale may be the best option if avoiding foreclosure and settling the mortgage debt are top priorities. However, a cash home sale may be preferred if speed and convenience are more important.

Sell Your House Fast in St. Louis, Missouri

If you need to sell your house fast but don’t want the hassle of a traditional home sale, contact Klamen Real Estate Buyers. We buy houses as-is. No repairs are needed. Avoid closing costs and realtor commissions. Close in as little as seven days. Call 314-721-6800 and get a fast cash offer from our local home buyers in Missouri.