Just a few years ago a short sale was something very few had heard of and even less actually agreed to pursue. The mortgage debt crisis has forced our hand on many occasions in the past few years making us more likely to consider options we would have once rejected. Even as foreclosures hit all time highs in recent months, many homeowners and lender were reluctant to agree to a short sale. However, the increasing trend in short sales, some say, may prove to be a sign of recovery.
While most lenders don’t stand to profit from, or even break even on, a foreclosure transaction many have still been hesitant to allow a short sale. Homeowners have traditionally sought loan modification options as their first choice of mortgage debt relief, but with such strict qualification standards many lenders left them with few other choices to avoid foreclosure.
Once homeowners could demonstrate the ability to recoup a higher percentage of the lost mortgage debt in a short sale over the lender allowing the home to enter foreclosure, the choice became clear. Most lenders reported a 30-40 percent increase in sale price of a home when sold through a short sale rather than foreclosure. Further, short sales are far less likely to negatively impact the neighborhood than a foreclosure, which in turn can better protect home values in that area. Lenders can now see the potential that a short sale can provide on a home that would be otherwise doomed for foreclosure, leading many to become more accepting of the idea.