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Lenders Shy Away From Short Sales As Home Prices Rise

By Mike Wheatley | June 3, 2013

What with home prices on the rise across the country, we're seeing the first signs of lenders turning away from short sales in the belief that they can secure a significantly better price through foreclosure, according to new stats from Realty Trac.


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The suggestion that lenders may be more unwilling to approve short sales in light of current market conditions comes following a 35% drop in the number of such transactions.

Daren Blomqvist of Realty Trac told CNN Money that the reduced level of short sales was surprising given that there are still more than 11 million underwater homeowners in the country. Nevertheless, he pointed out that, "Rising home prices are taking away the incentive for short sales on the part of both homeowners and lenders."

One factor in this could be that foreclosure sales prices are now beginning to rise, in line with prices for 'standard' home sales. Blomqvist argues that due to this, some banks are concluding that foreclosures are the better option from a financial perspective.

Things aren't as clear cut as all that however, as foreclosure sales have also plummeted in the past few months. Currently, they're at their lowest level since 2008, accounting for 21% of all sales, down from 25% this time last year. Foreclosures hit their peak in 2009, when they were estimated to account for 45% of all home sales, says Realty Trac.

Even so, there are some states where foreclosures remain extremely high. In California, Georgia and Illinois for example, foreclosures still account for more than 30% of all sales.

Mike Wheatley is the senior editor at Realty Biz News. Got a real estate related news article you wish to share, contact Mike at [email protected].
  • One comment on “Lenders Shy Away From Short Sales As Home Prices Rise”

    1. You can't simply correlate the stats and say the declining number of approved short sales is due to the rising home values. The value of the home is not the major, decisive, factor in a short sale, it is the existence of a borrower hardship. Since the economy is improving, there may be fewer hardships. And despite what some in the real estate community are espousing, being underwater on your home, does not constitute a hardship.

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