Foreclosures are tough: Homeowners lose their houses and ruin their credit, while banks get stuck with vacant, deteriorating real estate for months before selling it at a considerable loss. Increasingly, banks are finding another way: the short sale. Instead of waiting to foreclose, a bank preemptively sells a home at a deep discount and closes out the underwater mortgage, even if the house sells for less than the value of the mortgage. The result: Homeowners shed their mortgage debt, and banks unload properties more quickly and inexpensively. Here are the Top 10 metropolitan areas with the biggest average discounts on these pre-foreclosure homes, according to online foreclosure marketplace RealtyTrac. Can you guess which city is No. 1?
Rebert Harbison/The Christian Science Monitor/File
Short sales took off in the Seattle area in the fourth quarter of 2011: 925 pre-foreclosure homes were sold. That's a whopping 46 percent increase from the same period a year earlier and represented 7.4 percent of all home sales in the area, at an average price of $245,403. Buyers of short sale homes reaped a nearly 25 percent discount off non-foreclosure homes. Seattle is also among the top metros to buy foreclosure properties generally, at an average discount of 43 percent.
What makes a city ripe for short sales? “These are areas that have been hard hit by foreclosure,” says RealtyTrac Vice President Daren Blumquist. “So you have a lot of these distressed homeowners facing foreclosure. The other common denominator is that there’s healthy demand from buyers in these markets, so the short sales can be sold.
He adds that these cities tend to have discounted homes available in a range of price points. “Homes on the upper end in these towns are still holding their value. That means the homes that are being short sold tend to be on the lower end. That’s not always true, but the main thing is that lenders are willing to price homes low enough to attract buyers.”
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