The real estate market remains very challenging in most parts of the country. According to the New York Times, 14.6 million homeowners are “underwater” – owing more on their homes than those homes are worth in today’s market.
The foreclosure numbers are frightening as well. The number of borrowers who have last homes to foreclosure is already nearly 6 million. And another 3.5 million homes are in some stage of foreclosure proceedings.
It is scarcely surprising, then, in such a daunting market, that short sales are increasing. In the second quarter of this year, they accounted for 12 percent of home sales, up from 10 percent in the second quarter of last year.
A short sale is when a lender agrees to let a borrower sell the home for an amount that is less than the unpaid mortgage balance.
In many cases, homes that go by short sale remain occupied until they are actually sold. This tends to enable short sale properties to retain value better than foreclosed properties, which often sit empty.
A potential issue for sellers, however, is the possibility of a deficiency judgment by the lender against them. That issue is one that you should discuss with an experienced real estate attorney.
It can take time, as well, to work out a short sale. A survey by the California Association of Realtors found that short sales that were concluded in the second quarter of this year took an average of 245 days to complete. The California survey reported that some clients were foreclosed upon while trying to work out short sales.
Source: “Number of short sales on the rise,” USA Today, 8-29-11