Right now, they do not.
People who bought homes at the height of the real estate bubble, then had their interest rates raised, may be facing foreclosure. That’s especially true if they had a personal disaster at the same time, like a job loss or a divorce.
Some of them have been able to arrange a short sale, selling the house for something less than the mortgage amount. The lender typically eats the difference. That sounds bad for the banking industry, but the bank involved will lose much less money than if they were forced to foreclose. Figures for December show that short sales cost a bank 24 percent less than a comparable house that was sold in foreclosure, which resulted in a 64 percent discount from the appraised value when it was sold.
From an economic view, everyone is better off with a short sale. Bankers and investors see fewer losses, homeowners have less damage to their credit ratings, and neighbors’ houses are less likely to lose value because of the higher sales prices and the reduced vacancy times.
A short sale can be in better condition. Usually, the homeowner is living there, taking care of it and preventing vandalism. In the past, this type of sale was rare. They are becoming common as real estate agents and lenders have become more experienced at pricing and marketing them. Late last year, short sales accounted for 10.4 percent of sales.
The shift is helping the housing market with its backlog of distressed mortgages, and it’s reducing the number of properties that are standing empty. Short sales have helped to keep home prices stable and rising.