The state of short sales in America

According to new data from Lender Processing Services, Inc. (LPS), the number of short sales exceeded the number of foreclosures for the first time, pointing to evidence that banks have become more apt to sell homes for a small loss through a short sale than having foreclosed homes on their books indefinitely.

LPS reports that short sales accounted for 23.9 percent of all home purchases in January, which is the most recent month they are reporting for, so it is conceivable that the volume of sales that are short purchases could rise in coming data reports. Meanwhile, foreclosures account for 19.7 percent of home sales in the same period.

This marks a slow, yet significant rise as in January 2011, LPS reported that short sales accounted for 16.3 percent of transactions while 24.9 percent of sales were foreclosures – we are seeing a reversal of roles.

Many real estate practitioners would argue that it makes sense for all involved to pursue a short sale over a foreclosure, especially the banks, given the volume of foreclosures in the current economy. Now that banks are giving incentives on short sales in a push to close a deal, we will likely see more of a shift toward short sales rather than the stubborn old foreclosure playbook.