Short Sale Consumer Tips
Summary
The Missouri Real Estate Commission issued consumer guidance on short sales, explaining that short sales allow buyers to pay less than owed on a property but require lender approval. The Commission warns that the process can take 60 days or more and advises homeowners to document declining property values, consult legal and tax professionals, understand credit score implications, and obtain written approval agreements from lenders.
What changed
The Missouri Real Estate Commission published consumer tips explaining the short sale process, including that mortgage holders have final approval authority, multiple lien holders may be involved, and approval can take 60 days or more. The guidance advises consumers to document market value declines, consult legal and tax professionals regarding debt forgiveness tax implications, understand credit score impacts, and obtain written confirmation from lenders.
Real estate consumers, home buyers, sellers, and brokers should use these tips as educational background when considering short sale transactions. The guidance does not create compliance obligations but highlights practical considerations including lender approval requirements, potential credit reporting impacts, and the importance of written agreements.
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Apr 17, 2026GovPing captured this document from the original source. If the source has since changed or been removed, this is the text as it existed at that time.
CONSUMER TIPS - REAL ESTATE SHORT SALES
In today's real estate market, many Missouri home buyers and sellers are considering an option known as a "short sale," which allows a buyer to pay less than what's owed on a property. By some estimates, short sales accounted for as much as 10 percent of all home sales nationwide in the past year. The Missouri Real Estate Commission is warning buyers, sellers and real estate brokers that this process is not an easy one and not suitable for all situations. In a short sale, the mortgage holder (bank, credit union, mortgage company or other) has the final say on whether to accept the amount being offered, since it's less than what's owed on the mortgage. The mortgage holder releases the borrower from any further legal obligation to pay. Home buyers and real estate brokers should be aware that even if the buyer and seller agree on a price, the lender must still approve the deal, along with any other lien holders. That could include a second mortgage holder, a private mortgage insurer, a tax collection agency and others. It's not uncommon in the industry for the approval process to take 60 days or more. Here are suggestions for homeowners considering a short sale:
Be prepared to demonstrate to your lender that your home's market value has dropped
and that you are unable to pay the full mortgage balance, even with other assets you might own.If you elect to go with a short sale, talk to a real estate lawyer and an accountant. Make
sure any forgiven debt is not considered taxable income by the state and federal governments.Ask about impact on your credit score. Even if your lender agrees to forgive, say,
$20,000 of your debt, that simply means you are no longer legally obligated to pay that amount. Your credit report, however, may still reflect that you failed to pay $20,000 of debt.Be prepared to wait. Short sales are subject to lender approval, and it can take several
months for the bank to make a final decision on your request.If your lender approves the short sale, accepting less money than you owe, get the
agreement in writing from the lender.
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