More Short Sales Coming!

Madelaine K Properties May 12, 2012

CoreLogic Sees Short Sales Growing 25% in 2011 By CoreLogic

Short sales have been, and will continue to be, a necessary part of the mortgage industry as it seeks stabilization. Historically, borrowers that were no longer able to sustain their mortgage payments were foreclosed on by the lender. However, during the months that the loan is increasing in delinquency, the property is more likely to become distressed, or wind up abandoned entirely. Either situation devalues the property substantially. In addition, there are the legal costs associated with the foreclosure process. Therefore, lenders often consider short sales to be the lesser of two evils when compared to foreclosures. While significant losses may be incurred in both the foreclosure and short sale scenarios, the overall negative financial impact of a short sale is typically less than that of a foreclosure. In many cases, short sales represent the best way for lenders to minimize their overall losses. In general, all parties fare better when a foreclosure is prevented. Hence, it is no surprise that the number of short sales in the market has nearly tripled in the last eight quarters”. Figure 1 shows the recent trend in volume. The need for short sales will continue. At present. CoreLogic data shows 23 percent of all mortgages in the United States have negative equity, i.e., the homeowner owing more than the property.