Do lenders really prefer short sales instead of foreclosures?

It’s starting to look that way…

Nationally, 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).

The growing percentage of short sales, which don’t require going through the drawn-out foreclosure process, is a sign that the U.S. is making progress in working through its inventory of distressed properties.

In Florida, the number of short sales has exceeded foreclosures since July 2011, according to Lender Processing Services.

Banks have sped up the short-sale approval process, requiring less paperwork to prove hardship, especially for homeowners who haven’t made a mortgage payment for months on their primary residence. Banks have even offered short sellers as much as $35,000 to complete a short sale, an incentive that gets the homeowners engaged in selling the home.

Banks worked towards completing short sales before the signing of the recent $25b settlement, but the settlement pushed them to do more streamlining.  Banks understand it’s really the best exit for them as information on short sales has revealed that, on average, short sales can net the lender up to 10% more than foreclosing on the same home.

Short term, more short sales mean home values will remain low, or fall even further. But over time, plowing through short sales could mean that fewer homes will wind up owned by the banks and resold as a foreclosure, which would push down home prices even more dramatically. At best, we avoid another big wave of foreclosures that would send home prices spiraling down even further, something no one wants to see, least of all homeowners who pay their mortgage on time each month.

Thanks for reading…Steve Jackson..561.602.1258

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