Short-sale surge may end as foreclosures gain favor
NEW YORK – Dec. 2, 2013 – As home prices rise, lenders are showing less willingness to grant short sales, RealtyTrac reports.
The number of short sales has been gradually dropping the last few months. Short sales represented 5.3 percent of all sales in October, down from 6.3 percent the previous month and down from 11.2 percent last October, according to RealtyTrac data.
The National Association of Realtors® recently reported in its October existing-home sales report that short sales tend to sell at an average discount of 14 percent below market value.
“After a surge in short sales in late 2011 and early 2012, the favored disposition method for distressed properties is shifting back toward the more traditional foreclosure auction sales and bank-owned sales,” says Daren Blomquist, vice president at RealtyTrac. “The combination of rapidly rising home prices – along with strong demand from institutional investors and other cash buyers able to buy at the public foreclosure auction or an as-is REO home – means short sales are becoming less favorable for lenders.”
Foreclosure auction sales to third parties accounted for 2.5 percent of all sales, nearly double what it was a year ago when at 1.3 percent, RealtyTrac reports. Sales of REO homes repossessed by banks made up 9.6 percent of sales in October, about the same percentage from a year ago.
In some states, short sales still remain a high proportion of sales. RealtyTrac notes that the states with the highest percentages of short sales in October were: Nevada (14.2%); Florida (13.6%); Maryland (8.2%); Michigan (6.7%) and Illinois (6.2%).
Source: RealtyTrac and “Short sales falling out of favor with lenders as prices surge,” Inman News (Nov. 25, 2013)
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