The document discusses a significant shift in home sales, where banks are more willing to accept short sales to avoid foreclosure, offering financial incentives due to lower losses. Reports indicate that the ratio of foreclosure to short sales has flipped, with short sales now comprising 60% of distressed sales. Short sales stabilize the housing market and are mutually beneficial for lenders, homeowners, and the overall economy.

1. Volume 15, Issue 40 For the week of October 17, 2011
Another Look at Short Sales
There is another "dramatic shift" in home sales, according to Ron Peltier,
chairman and chief executive officer of HomeServices of America Inc., the
second-biggest U.S. residential brokerage which has over 700 offices under
the Coldwell Banker brand.
That "dramatic shift" is in bank's willingness to sell than the mortgage
balance to avoid foreclosing.
Finally, common sense is coming into the equation!
Typically short sales sell at a discount of about 20% for home not in financial
distress, in contrast to a 40% discount for bank-owned homes also known as
REOs. That is of 20% more for the mortgage holder, so it is a clear financial
incentive for banks to accommodate a short sale over having to process a
foreclosure.
HomeServices reports that the distressed sales were a mix of 60%
foreclosure and 40% short sales. But that ratio has now flipped.
Why Banks Should Short Sell:
Following the Robo-Signing and subsequent delays in the foreclosure
process, banks are facing the realities of how to dispose of these assets,
which in fact become a liability to them:
- First, banks do not want to be landlords, they are in the business of
lending on not acquiring real estate.
- There is increasing pressure on banks to hold and rent-out these
properties so as not to flood the housing market with for sale inventory
and further drive down values and selling prices.
- This is a policy that Fannie Mae and Freddie Mac are exploring for the
same reasons and collectively that would place an enormous inventory of

2. rental homes on the market.
- This would bring another wave of income loss and uncertainty further
prolonging a housing market recovery.
Short Sales Benefit All:
- Mortgage lenders recover more money
- With either a short sale or foreclosure the bank stands to lose money. It
makes so much more sense to negotiate the short sale with a 20% discount
than to push through a foreclosure and take 40% discount in a less
predictable market.
- The housing market will be less damaged - Either way the market has to
absorb this inventory before it can normalize. Short sales will better stabilize
market values and sales prices and transaction time.
- Short sales will benefit the lenders, the homeowners, home values, selling
prices, and finally it will benefit the housing industry as a whole including real
estate and lending professionals.
Short sales over foreclosures benefit the entire economy.