Studies have shown (look, just trust me on this — studies really have shown) that while a foreclosure sale can knock down property values in a neighborhood, short sales don’t have that kind of effect.
Ergo, short sales are better than foreclosures.
So it’s good news that RealtyTrac is reporting that short sales are up. Per USA Today:
Short sales — which occur when a lender agrees to a home sale for less than what’s owed — were up 33% in January year-over-year, and preliminary February numbers also look strong, according to market researcher RealtyTrac.
Although the most important tidbit might be this sentence:
RealtyTrac says foreclosure sales, which occur after a bank has repossessed a property, still outnumber short sales nationwide but the gap is closing. (Emphasis mine.)
A likely culprit for the change is the new FHFA rule that requires banks to respond to short-sale requests more quickly. Homeowners have obviously preferred them to foreclosure, but lenders too often dragged their feet or ignored the request.
Of course, the best result will be when short sales and foreclosures both drop to negligible levels. Till then, though, we’ll take a bit of good news.