Are Short Sales on the Rise? Trends, Data & What Buyers Should Know

Are you inquiring whether short sale properties are becoming more prevalent? 

After a period of relative inactivity, short sales are gradually experiencing a resurgence, albeit still representing a small segment of the market. Let us examine the current developments and their implications for prospective buyers.

If you would like to learn more about my services and how I assist buyers in North Jersey with navigating short sale real estate, please visit my About page.

What Is a Short Sale?  
A short sale occurs when a homeowner sells their property for an amount that is less than the outstanding mortgage balance, with the approval of the lender. This option serves as a less detrimental alternative to foreclosure, providing the seller with opportunities for negotiation and control.

The term “short sale” refers specifically to this arrangement to reduce debt, rather than the payment methods utilized by buyers.

Properties involved in a short sale still require the inclusion of a short sale addendum and the consent of the lender.

The short sale process can be protracted and entails significant documentation.

For inquiries regarding local market trends or additional short sale properties in your area, please refer to our market snapshot.

Are Short Sales Experiencing an Increase?  
The concise answer is: Yes, albeit slightly.  

Short sales have risen by approximately 142% compared to the previous year, returning to levels observed in early 2020. However, they still account for only about 0.5% of total home sales in numerous markets.  

Recent data indicates that Federal Housing Administration (FHA) loans constitute 58% of current short sale listings, while Veterans Affairs (VA) loans represent approximately 16%. This trend suggests financial strain among certain borrowers.  

Although the increase is modest—reflected in "ten more" local listings—it indicates early signs of economic pressure, including inflation and job uncertainty.  

Trends experts have observed the following:  

FHA borrowers, who are typically newer homeowners, are demonstrating heightened distress.  

As forbearance programs conclude, it is possible that an increase in distressed sales, such as short sales, may occur.

Best Practices for Buyers

1. Exercise patience. Anticipate an extended timeline, which typically ranges from three to six months, and may extend up to one year.

2. Engage a specialized Realtor. The short sale real estate market is intricate; therefore, it is advisable to select a professional who possesses comprehensive knowledge of the process.

3. Ensure financial readiness. Obtaining pre-approval will enhance the visibility of your offer, particularly in light of slower response times from lenders.

4. Prioritize quality over quantity. Short sale properties are frequently sold "as-is," making it essential to obtain expert inspections.

Moving Forward

Are short sales experiencing an increase? They are making a subtle resurgence, although they remain uncommon. For buyers, short sales present opportunities for discounted properties; however, they necessitate patience, thorough preparation, and specialized knowledge.

If you are considering the possibility of purchasing a short sale home or wish to inquire about available options in your local area, please utilize my Mortgage Calculator to determine your qualifications, and let us discuss your next steps.

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