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Short sale foreclosure rates soar

More than one in four home sales during the first quarter of 2012 consisted of properties in foreclosure, according to a new report released earlier this month. Distressed properties in some form of foreclosure accounted for about 26 percent of residential sales, a 4 percent increase over the previous quarter.

That news means that about a quarter of homes are selling for far less than their estimated value, with most going for nearly 30 percent less than homes that are not in foreclosure. Sometimes a short sale is better for a distressed homeowner because it allows them to get some money back.

Experts say that foreclosure-related sales tend to trend upward during the first quarter of every year, especially among homeowners who are looking to unload property before the foreclosure process ramps up. These short sales were at their highest rates in three years during the first part of 2012, say researchers, as the average cost of a home sold in pre-foreclosure dropped to its all-time low.

These short sales are becoming increasingly popular among banks and homeowners. They typically occur when a property owner owes more on the property than it is worth. The bank agrees to absorb the cost of the sale, even when the properties are sold at lower market value. There were about 110,000 short sales during the first three months of the year. That is up 25 percent from last year, according to official estimates.

This type of sale is quickly becoming the most common method for banks and property owners who want to quickly unload defaulted properties. Experts say that it is primarily because banks get about 20 percent more from such sales than they would from a full foreclosure. Also, foreclosures can take years to unload, while the short sales happen with relative speed. Lenders are more enthusiastic about approving loans for such properties, which has resulted in their increased frequency.

Source: CNN Money, "Foreclosures made up 26 percent of U.S. home sales in first quarter," Jessica Dickler, May 31, 2012

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