As lenders increasingly favor the faster and more lucrative short sale process, those deals outnumbered purchases out of foreclosure for the first time in the U.S. Citing data from Lender Processing Services, Bloomberg News reported that short sales accounted for 23.9 percent of home purchases in January, while foreclosures represented 19.7 percent of sales.
A year earlier, 16.3 percent of deals were short sales, while 24.9 percent were foreclosures.
Lenders are opting for the short sale route for three reasons: to avoid the drawn out foreclosure process (which is especially problematic in states that use the judiciary system to sort through the cases), to sidestep the costly legal fees associated with foreclosures and to reap better sales prices from the properties. Short sales trade at a 23 percent discount to non-distressed homes, compared to 29 percent discounts for foreclosures, according to Lender Processing Services.
Some lenders, including Bank of America, Wells Fargo and JPMorgan Chase, have even begun incentivizing short sales, promising payouts to distressed homeowners who take that road.
In New York, where the foreclosure process endures for an average fo 1,056 days, 7.9 percent of home purchases in January were short sales, while just 2.3 percent were sold by banks out of foreclosure. [Bloomberg]