Previously, a government program called HAFA (Home Affordable Foreclosure Alternative)
Foreclosure process is lengthy and very expensive. According to Francis Wissman of Moody’s Investors Service, loss severities on properties liquidated through short sales have averaged approximately 15% lower than those on properties liquidated through REO sales. This simply means that the bank loses money either way, but they lose a lot less money when they do a short sale vs. a foreclosure.
Due to this, more and more banks are now inclined towards short sales. A research was done on approximately 200,000 properties in Southern CA to observe short sales and foreclosure trends. It was found that there has been a significant increase in completed short sales in the past 3 years, while a downward trend has been observed in completed foreclosures.
Also, the reason why more homeowners are opting for a short sale is because the effect of short sale on credit is not as negative as the effect of foreclosure or bankruptcy.
About the author: Colleen Coleman is a real estate broker and short sale specialist in CA. She has over 95% success rate at closing short sales for homeowners and fellow realtors.