Lenders Prefer Short Sales to Foreclosures
Written by Emil Fleysher | July 3, 2012 | Bankruptcy
Short sales are exceeding the number of foreclosure sales in South Florida. Broward County had 1,831 short sales in the first three months of 2012, compared with 1,476 foreclosure deals. On a quarterly basis, this is the first time short sales have outnumbered foreclosures in Broward since early 2008. Short sales also exceeded foreclosures in Palm Beach County and across Florida from January through March.
Banks are more motivated to do short sales because of the messiness and the risk of foreclosures. After a homeowner defaults on a mortgage, the bank files a foreclosure lawsuit, but the two sides often continue to negotiate a resolution. A short sale is when the lender allows the homeowner to sell for less than what’s owed on the mortgage and absolve the homeowner of paying a deficiency. Foreclosures can be lengthy. It takes an average of 861 days to complete a foreclosure in Florida, one of the longest timelines in the nation. There’s a backlog of cases in Florida courts because in 2010 some bank employees admitted they had signed off on thousands of cases without proper review. As a result, some major lenders temporarily suspended foreclosures.
A short sale in Florida takes an average of 603 days, though many now are happening much faster sometimes within a few months. Short sales are helping the housing market recover because they more quickly put distressed homes in the hands of cash buyers or owners who can afford the mortgages. The number of Broward short sales in the first quarter of 2012 increased 30 percent from the same period a year ago. Statewide, short sales rose 18 percent from a year ago. Some of the biggest lenders, including Bank of America and Chase, now offer thousands of dollars to homeowners to complete short sales.
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