Short sales happening more than sales of bank-owned homes

Sales of homes facing foreclosure are increasing and exceeding sales of bank-owned homes. This may be a result of the efforts made by lenders to avoid foreclosures on properties where mortgage are due and owing. In fact, sales of pending foreclosure homes increased 22% since the year earlier.

A short sale is when the lender agrees to accept less than what the homeowner owes on their property by selling the property for a third party. 65% of the increase in sales of pending foreclosure homes resulted in short sales. Banks are more willing to agree to short sales as an alternative to foreclosure than they were in the past. Foreclosures can often result in bigger losses for the lender and takes the lender through a time-consuming and costly process. Lenders are coming to the realization that they lose less by approving a short sale than by dealing with a foreclosure.

Lenders are eager to fast track the foreclosure process. As a result, allegations were made that lenders are processing foreclosures without the required verifying documents, especially in states where the courts must sign off on foreclosures. Five of the biggest U.S. banks agreed to settle the claims as part of a deal with federal and state officials for $25 billion dollars! Since this settlement, lenders are more willing to agree to short sales as a way to provide mortgage relief to homeowners. Between March, 2012 and September, 2012, lenders have reportedly provided $26 billion in mortgage loan relief to borrowers, half of which stems from short sales.

Some lenders are even providing incentives to encourage homeowners to pursue short sales. Other lenders are working to speed up processing time from the past years 6 month or more processing time before being finalized. The goal for lenders is to cut the processing time to 60 days or less. Compared to the 6-12 month average prior, this is a vast improvement. Lenders have also begun approving short sales for homeowners who have not yet entered the foreclosure process. All of this increase in short sales has begun to outpace the current sales of bank-owned homes. In the third quarter alone, over 4,000 more homes were sold in some stage of the foreclosure process than bank-owned homes.

Regardless, buyers who purchased bank-owned homes or preforeclosure homes got a bigger discount when compared to other types of homes. The average buy of a foreclosure home paid $177,430. Overall, short sales are increasing and the price for the potential buyer is decreasing.