More Homeowners Choosing Short Sales over Foreclosure

With the number of foreclosures on the market at record highs, many troubled homeowners are looking for other options to avoid the damage to their credit and to simply get out from underneath their home loan as soon as possible.

A short sale occurs when a bank or mortgage lender allows the homeowner to sell their home for less than the balance owed on it. The lender then forgives the remainder of the loan.

Many homeowners have a better chance of qualifying for a new mortgage soon after completing a short sale then were they to go through a foreclosure. Banks too sometimes prefer an owner to do a short sale because it saves them from the expensive cost of a foreclosure. As a result, there are more homeowners who are avoiding foreclosure by going through a short sale.

Last year, short sales accounted for about 10 percent of the number of homes on the market nationwide. That figure has increased by 2 percent and short sales now account for about 12 percent of the homes on the market. In some states – such as Georgia, Michigan, Nevada, California and Colorado - short sales have become still more prevalent. In California, for example, short sales accounted for about 25 percent of homes sold in the second quarter of 2011, a 7 percent increase year-over-year. In Colorado, they accounted for 17 percent of homes sold (also a 7 percent increase year over year).

Bank of America expects to complete at least 100,000 short sales this year, which is twice as many as it completed in 2009. A Well Fargo senior vice president claims that short sales have increased recently because there are not as many bank-owned homes on the market in some areas, leaving eager buyers to actively seek out short sales.

Short sale homes have some benefits over foreclosed homes to purchasers and to the larger community. One of the main benefits for a purchaser is that a short sale home is ordinarily occupied by the seller until it is sold. This helps the home retain its value as the plumbing system and other parts of the house are not left to sit for months or even years at a time. The absence of a long vacancy period also enables other homes in the neighborhood to retain their value.

Are you facing a foreclosure? Have you thought about the option of going through a short sale? Check with a trusted financial advisor who is experienced in mortgages and real estate to see if a short sale is right for you.

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