Short Sales Up 33% as Foreclosure Option Stages Comeback

After a three-year lull, there has been resurgence in short sales – when properties are sold at a loss – indicating that banks are trying to push through inventories of pre-foreclosure properties.
There was a 33 percent increase in short sales in January 2012 compared to a year ago, with 32 states showing big jumps in year-over-year pre-foreclosure sales, according to a new report from RealtyTrac.
Georgia led the way with a 113 percent increase, followed by increases in Michigan (90 percent), California (52 percent), Texas (48 percent), Arizona (44 percent), Nevada (36 percent), and Florida (20 percent).
Short sale transactions over the past three years had declined after peaking in the first quarter of 2009. But the latest figures suggest a trend reversal and a potentially record year for short sales in 2012.
Short sales outnumbered bank-owned REO sales in 12 states, including Utah, California, Arizona, Florida, Indiana, Colorado, New York and New Jersey.
“Short sales have long held great promise as a market-based solution to the nation’s foreclosure problem,” said Daren Blomquist, Vice President at RealtyTrac and author of the report. “January foreclosure sales numbers, along with first quarter foreclosure activity, strongly indicate that downward trend is ending, and we believe 2012 could be a record year for short sales.”
There are two large pools of potential short sales.
One of them represents delinquent loans not yet in the foreclosure process – about 3.5 million properties, according to the fourth quarter 2011 National Delinquency Survey by the Mortgage Bankers Association. T
The second – and much larger – pool of potential short sales is underwater homeowners.
A RealtyTrac analysis of 45 million outstanding mortgages nationwide finds that 12.5 million of these mortgages, or 28 percent, are seriously delinquent — meaning that loan amount is at least 25 percent higher than the estimated value of the property securing the loan.

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