Foreclosure option: Short-sale pace growing

The number of short sales grew steadily through the end of 2011 and is expected to continue to grow in 2012.

The National Association of Realtors research department estimates that the number of short sales in the United States will increase by 9.2 percent in 2012 to approximately 546,500.

This trend will continue a shift towards alternative methods of transitioning underwater owners who can no longer afford their mortgages out of homeownership without excess cost to banks and negative ramifications on homeowners of foreclosure.

Demand for short sales increased over the past year as the timelines for foreclosures in process continued to rise in both judicial and non-judicial states. Banks accrue additional costs on maintenance and forgone interest or investments as properties sit in foreclosure. Consequently, it is to their advantage to prevent properties from reaching foreclosure.

While the number of new delinquent loans has fallen in recent months, there remain a large number of underwater borrowers – more than 11 million by some estimates – who are at risk of falling behind on their payments. As these properties come to market, they will need to be liquidated for less than their mortgage amount, according to NAR.