Short Sales Surpass Foreclosures as Banks Agree to Deals

The number of U.S. home short sales surpassed foreclosure deals for the first time as banks became more agreeable to selling houses for less than the amount owed on their mortgages, according to Lender Processing Services Inc. (LPS)
 
According to Bloomberg news, in January short sales accounted for 23.9% of home purchases. the most recent month available, compared with 19.7% for sales of foreclosed homes, data compiled by the Jacksonville, Florida-based company show. A year earlier, 16.3% of transactions were short sales and 24.9 % involved foreclosures. The growing percentage of short sales is a sign that the U.S. is making progress in working through its inventory of distressed properties.  

Last year some banks began giving cash inducements to selected homeowners who agreed to a short sale as a way of speeding up the process as banks have struggled to reduce losses from delinquent mortgages. According to the Mortgage Bankers Association, almost 4.4 % of homes with loans had received a notice of foreclosure sale at the end of 2011, the 11th consecutive quarter the rate has been higher than 4%

RealtyTrac, Inc. reported April 12th that foreclosure filings, including notices of defaults and bank repossessions, fell 16% in the first quarter from a year earlier after lenders under legal scrutiny slowed actions against delinquent homeowners.

Other reports haven’t shown the same magnitude of short- sale growth. The National Association of Realtors reported that 13% of transactions were short sales and 22% were foreclosures in January. In February, short sales increased to 14% and foreclosure-related transactions declined to 20%.

The U.S. Department of Housing and Urban Development reported a preliminary 19,600 short sales in January, compared with the Lender Processing Services tally of 48,721. An April 6 HUD report showed that the number of short sales rose 4.3% from a year earlier as the number of real estate owned, or REO, sales (Real Estate Owned) -- property owned by a lender -- fell 39%.

Before lenders agree to accept a loss on a short sale, they usually require homeowners to show evidence of hardship, such as inability to afford their mortgage payments or the need to relocate for a job. Banks have sped up the short-sale approval process and are known to offer homeowners incentives that gets them engaged in selling the home.

Lender Processing Services reported that short sales outnumbered foreclosures in states with some of the largest shares of homes facing foreclosure, such as Arizona, California, Florida, Nevada and New Jersey,


Source: Bloomberg.com