Residential home prices may get a boost from an unlikely source: a pickup in short sales, which occur after default, but before a foreclosure auction.
There has been a "dramatic shift" in the willingness of servicers to sell a property for less than the mortgage balance to avoid foreclosing, according to Ron Peltier, chairman and chief executive officer of HomeServices of America Inc., the second-biggest U.S. residential brokerage.
Short sales typically change hands at a discount of about 20% to homes not in financial distress, compared with a 40% price cut for bank-owned homes, according to figures compiled by RealtyTrac. (Short sales jumped 19% in the second quarter from the prior three months while foreclosure sales were flat, RealtyTrac said.)
"Banks have become much more supportive of short sales," Peltier told Bloomberg News recently.
"That's better for the lenders, who have smaller losses on a short sale, and it's going to be better for homeowners, who won't have as much psychological distress as a foreclosure,” said Peltier, whose Minneapolis-based firm is owned by Berkshire Hathaway Inc.
Distressed sales brokered by HomeServices used to be 60% foreclosures and 40% short sales, but now that ratio has flipped, said the CEO.
