A fresh wave of distressed sales is rolling through the U.S. housing market; this time driven by short sales aimed at protecting sellers' credit, not by foreclosures.
Such sales could help shore up the floor under housing values because short sales, unlike foreclosures, give homeowners a strong incentive to get the best price.
"I worked hard for a long time to keep my credit score close to perfect, and I know a foreclosure would be much worse for my credit than a short sale," Leanna Harris, who listed her home as a short sale about a month ago, told The Washington Post.
"If there's a chance we can avoid foreclosure, we'd rather do that."
Completed short sales, in which lenders let homeowners sell their homes for less than what is still owed on the mortgage, have more than tripled since 2008, and 400,000 of these deals are projected to close this year, according to mortgage research firm CoreLogic.
Lenders say short sales are less expensive than foreclosures to handle and help ensure that homes remain in good shape as they change hands.
Mortgage giants Fannie Mae and Freddie Mac are very much involved. Fannie Mae approved short sales on 36,534 home loans it owned in the first half of this year, nearly three times the number it approved in 2007 and 2008 combined. Freddie Mac approved 22,117 short sales in the first half of 2010, up from a mere 94 in the first half of 2007.
The Press Register reports that new legislation favored by the National Association of Realtors would impose a 45-day deadline for lenders to respond to short-sale offers, significantly shortening the length of time short sales usually take.
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