Short sales of homes in foreclosure outnumbered sales of
bank-repossessed properties in the third quarter of the year, as
lenders show increasingly willingness to work with distressed
homeowners short of foreclosure.
In fact, distressed home sales, included short sales of homes
outside the foreclosure process, made up 41 percent of all U.S.
home sales during the third quarter of the year, according to the
real estate data firm RealtyTrac. Short sales alone made up
one-third of all sales.
Short sales of homes outside the foreclosure process made up 22
percent of all home sales in the third quarter, according to
RealtyTrac's third quarter foreclosure report, released today. The
majority of these were homes on which payments were either
delinquent or in default, but for which foreclosure proceedings had
not been initiated, according to Daren Blomquist, RealtyTrac vice
"We don't know if they're in default or not," Blomquist said.
"All we know is that they haven't received their first foreclosure
New rules allow hardship sales
Blomquist said one factor is that
now allow short sales in certain types of hardship cases without
the home going into foreclosure, including when the homeowner is
required to relocate for employment purposes. That rule officially
took effect Nov. 1, but he said many lenders had begun approving
such sales prior to that, following the rule's announcement last
In total numbers, non-foreclosure short sales are up 17 percent
from the same period one year ago.
Foreclosure-related sales made up 19 percent of all home sales
during the third quarter of the year, down slightly from 20 percent
in the second quarter. Pre-foreclosure short sales outnumbered
sales of bank-repossessed properties, with 98,125 short sales of
homes in the foreclosure process, compared to 94,934 real-estate
owned (REO, the industry term for bank-repossessed properties)
sales during the same period.
Overall, the 193,059 distressed properties sold during the third
quarter represented a 21 percent increase over the second quarter
of the year, but was down 3 percent from the third quarter of 2011.
That represented 19 percent of all residential home sales, down
slightly from a 20 percent share in the second quarter of 2012.
Expiration of tax relief looms
"The shift toward earlier disposition of distressed properties
continued in the third quarter as both lenders and at-risk
homeowners are realizing that short sales are often a better
alternative than foreclosure," Blomquist said. "However, the
scheduled expiration of the Mortgage Forgiveness Debt Relief Act at
the end of this year could stifle this trend toward short
The Foreclosure Debt Relief Act allows homeowners who have part
of their mortgage debt waived by a lender as part of a short sale
to avoid having to declare the forgiven debt as income for tax
purposes. Congress may still decide to extend the Act or
retroactively renew it after the first of the year if it
Homes in the foreclosure process or bank-owned sold at an
average discount of 32 percent compared to nondistressed
properties, according to the report.
First published on MortgageLoan.com at: