The number of shortsales nationally exceeded that of trustee’s foreclosure sales, or real estate owned (REO) sales, according to Lender Processing Service, Inc. (LPS). Nationally, shortsales increased from 16% of home purchases in January 2011, to 29% of home purchases in January 2012.
Foreclosure sales nationally decreased 5% over the past year, from 25% of home sales in January 2011, to 20% of home sales in January 2012.
The data division of LPS proffered shortsales as the best option lenders have for negative equity property, reporting the purchase prices for shortsales sales were 6% higher, on average, than for foreclosure sales.
In California, which has more homes facing foreclosure than any other state in the nation, the number of shortsales has been greater than that of foreclosure sales since August 2011. In January 2012, shortsales represented 37% of all home sales in California, while foreclosures represented 26% of all home sales.
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If individual negative equity homeowners are willing and able to opt for a shortsale rather than a foreclosure sale, they’re taking one for the team. Homeowners who opt for shortsales receive no financial benefit from doing so; a shortsale effectively damages the homeowner’s credit as much as a foreclosure sale, with more hassle for the homeowner.
Homeowners first must meet eligibility requirements to qualify for a shortsale (inability to qualify to pay), then find a buyer and endure the process of negotiating with their lender for approval of the price offered by the buyer. The prolonged and exhausting shortsale approval process often lasts several months from start to finish.
Additionally, the extensive time invested in facilitating a shortsale is a drain on everyone involved, from the seller and the seller’s agent to the buyer and his agent. All the while, the payoff for this type of transaction is nonexistent for a homeowner and minimal for an agent, especially the buyer’s agent.