Short Sales nearly tripled the number of foreclosed property sales in 2012 according to RealtyTrac spokesman in a recent interview with CNN Money. 32 percent of all residential sales were short sales while only 11 percent were bank foreclosures. A good indication that both banks and struggling homeowners are recognizing the benefits of a short sale over a foreclosure.
In a short sale the lender agrees to accept less than the full amount due on the mortgage note on the sale of a property in cases where more is owed than the property is worth. Typically, the homeowner is required to show they are dealing with a hardship that prevents them from continuing to pay the mortgage payment. This allows the homeowner to deal with everything involved in the sale of the property, saving the lender the expense and time consumed in a lengthy foreclosure process, just to be sold as a bank owned (REO) property in the end. A typical foreclosure process and resulting REO property sale costs the lender tens of thousands more dollars resulting in an even bigger loss. The short sale is a much more dignified approach to a difficult situation for the homeowner, who many times walks away owing nothing on the underwater property, and may even put a few thousand in their pocket for relocation expenses. In most cases the short sale option has a less devastating impact on their credit rating as well.
“We’re seeing fewer of the most disruptive sales, the [bank owned foreclosures], hitting the market but there are still a lot of distressed property sales,” said Daren Blomquist, spokesman for RealtyTrac. “They’re shifting to short sales.”
This also helps rebounding property values. RealtyTrac reports an average discount on bank owned foreclosure properties of 39%, while the average short sale sold for 23% below market in the fourth quarter.
One important aspect for any distressed homeowner considering the short sale option is to find an experiences short sale specialist realtor to guide them through the complex issues surrounding a short sale transaction, and negotiate effectively on their behalf with the lender(s).