Long favored in Florida, short sales for the first time are more popular than sales out of foreclosure in the U.S., according to data from Lender Processing Services cited by Bloomberg News. As lenders increasingly favor the faster and more lucrative process, short sales accounted for 23.9 percent of home sales 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.
In Florida, short sales have outnumbered bank-owned sales since July.
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 also begun incentivizing short sales, promising payouts to distressed homeowners who take that road. [Bloomberg]