Short Sales gaining on REO sales as “Change is Afoot”

April 27, 2012 by · Leave a Comment
Filed under: REO News 

Interesting data and charts.

Mortgage News Daily – RealtyTrac said on Thursday, releasing new data which indicate, based on January’s numbers, that pre-foreclosure sales (most of which are so-called short sales) in the first quarter were the highest since the first quarter of 2009.

In theory, the company said, a short sale has long been viewed as an “elegant solution” to the nation’s foreclosure problem.  A short sale, in which the lender accepts less money than it is owed, provides a win-win-win for the buyer, bank, and even the seller.  “The buyer purchases a house they want at a price they can afford, the bank gets the best price for its distressed asset, and the seller walks away from a mountain of debt, free to get a fresh start.”

Short sales, however, have never lived up to their hype.  Pre-foreclosure sales rose in late 2008 and early 2009, reaching a peak of 128,000 in early 2009 but then there was a sharp drop and since the second quarter of 2009 through the end of 2011, pre-foreclosure sales have averaged about 89,500 per quarter.

However, in January there were more than 35,000 pre-foreclosure sales nationwide, 33 percent more than one year earlier, which puts these sales on track to reach over 105,000 for the quarter.  The January figure follows December sales of more than 37,000 indicating that January was not an anomaly. In addition there have been even larger increases in some states, for example in Georgia where pre-foreclosure sales were up more than 100 percent on an annual basis and California, Massachusetts and Michigan, Utah, South Carolina, and Wisconsin all of which had increases of over 50 percent.

Sales of bank-owned real estate (REO) have always been higher than pre-foreclosure sales, but that gap is narrowing.  In January there were only about 2,500 more REO sales nationwide than pre-foreclosure sales and in 12 states pre-foreclosure sales outnumbered REO sales in January.  In other states the gap between the two sales types is narrowing, indicating, RealtyTrac says, that lenders are viewing short sales more favorably when compared to foreclosing and marketing the resulting REO.

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