Short Sales are picking up as Popular Alternative for Foreclosure – Survey

Are you skeptical about Short Sales being the escape route for foreclosure? See this – the latest monthly survey by Campbell/Inside Mortgage Finance. They conducted a survey on Real Estate Market conditions, which says Short Sales are showing an upward trend of 15.9 per cent of home purchase transactions, during the month of January.

In comparison with distressed property activity during the month – 13.4 per cent of damaged Real Estate Owned (repossessed by mortgage lenders and banks after foreclosure public auction) property sales; and move-in-ready REO properties accounting for 13.8 per cent – the figure of Short Sales are well above.

What does it mean? Well –  once looked down upon as a slow and problematic process, the Short Sales are getting popularity among home owners, to dispose of their distressed properties as the best method, to avoid foreclosure.

In the home purchase market, as recently as November 2009, the above survey tells that the figures of Short Sales stood at 12.4 percent; while ready to move in REO properties accounted 12.6 per cent and that of damaged REO properties stood at 12.3 per cent of the total real estate activities nationwide.

If you analyze the reasons for the momentum gained by Short Sales activity, you will find that first-time home buyers are mainly attracted by the lucrative sale prices. They get good housing properties – well maintained by the home owner until the time of short sales, in contrast to the deserted foreclosed homes.

According to the survey results, the Short Sales properties are available typically for 91 per cent of the list price, whereas on an average, the ready-to-move-in REO properties are sold at 99% of the list price, quoted by the lenders repossessing them.

Yet another reason why Short Sales are becoming popular is very obvious. By resorting to Short Sales, the lender incurs lower losses in recovery of the mortgage loan. This can neither be guaranteed in a foreclosure sale public auction nor on the sale after repossession. At times, the lender incurs more losses by the upkeep and maintenance of the damaged REO properties. Here also the lender derives advantage by the Short Sales, since the property is being maintained as saleable one, by the distressed barrower.

The troubled home owners escape from the impacts of foreclosure, by going in for Short Sales. Thus the Short Sales route provides a win-win situation for both the lender and the barrower. No wonder it is gaining more popularity, as certified by the Campbell Survey.