Short sales on the rise:
Alameda county NOD (notice of default) filings are down 28.1% from a year ago and notices of sale are down 12.16%. According to CitiMortgage the percentage of troubled loans that now go to short sale route have quadrupled (4% to 16%) in the last two years. Bank of America reported they completed over 95,000 short sales in 2010 which more than doubles the number in 2009. BofA also reported that they completed more short sales than it sold previously foreclosed homes every month for the last year and a half. Last month (May), BofA completed roughly 9,000 short sales compared to 7,000 foreclosures sold.
After the filing of a Notice of Trustee Sale, there are three possible outcomes: Cancellation of sale in case of al loan modification,short sale, a filing error, or a legal requirement to re-file the notice after extended postponements; sale by the bank after placing the opening bid for purchase by a 3rd party, typically an investor; or lastly the property fails to sell and becomes part of that bank's REO inventory.
It is far more expensive for a bank to do short sales vs. taking the foreclosure route with mortgages that are behind on payments. As banks continue to deal with effectively closing short sale properties the shadow inventory will continue to decline.
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