The housing market may be receiving a significant boost from an unusual source: a rise in short sales. Short sales, as you may know, arise when a home is in default but hasn't been officially foreclosed upon, and the bank decides to let the owner sell it for less than the mortgage balance rather than repossess it.
According to RealtyTrac, short sales were up 19 percent in the second quarter of this year, while foreclosures were flat. HomeServices of America, a residential brokerage, says it now sees about 60 percent short sales and 40 percent foreclosures, whereas those figures used to be reversed. It's not much of a surprise that short sales would be preferred by banks: They generally end up selling at a discount of about 20 percent, compared to similar homes not in default. Foreclosures typically carry a discount of around 40 percent.
And then there's the time saved. As we mentioned recently, foreclosures in New Jersey take an average of around two and a half years. Speeding up that process will help clear the excess inventory off the market, and get everything moving again.
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