Despite industry and government efforts to make short sales — transactions in which the lender agrees to accept less than the mortgage amount owed by the homeowner — easier and more quickly accomplished, improvements are coming up short.
In some cases, the difference between the two numbers is being forgiven by the mortgage lender. In others, the homeowner must arrange with the lender to settle the rest of the debt.
Theoretically, short sales are less costly to a lender than foreclosures. There are fewer legal costs involved, for example. But the chief attraction of a short sale is that there is a buyer for the house, while a foreclosed property can sit in a lender's portfolio for months.
That's why the Obama administration in March appended short sales to its efforts to reduce foreclosures for homeowners who fail to make the grade for the federal Home Affordable Modification Program.
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The new program, known as Home Affordable Foreclosure Alternatives, is set to end Dec. 31, 2012. Under its terms, a lender must offer a short sale in writing to a borrower within 30 days after the borrower either is ruled ineligible for mortgage modification or has been deemed unable to sustain payments in a trial plan.
Lenders are offered incentives for each completed sale. So far, the results have been less than definitive.
"We haven't heard of any noticeable shifts" in the process that would indicate an improvement, said National Association of Realtors spokesman Walt Molony.
Anecdotally, the association has received fewer complaints about delays, he said, but there is no data to back that up.
Twenty-three percent of residential property owners nationally are "underwater" on their mortgages — that is, they owe more than their homes are now worth, according to CoreLogic Inc., of Santa Ana, Calif., which tracks foreclosure information.
For such homeowners, a short sale can also be the best option, real estate experts say, because it may not hurt their credit history as much as a foreclosure would.
As a result, the homeowners may be able to qualify for another mortgage sooner once they get back on their feet financially.
Yet real estate agents continue to have problems getting short sales through the pipeline.
"It depends on the lender," said Art Herling, Long & Foster vice president for the Philadelphia region. Some are more willing to work with agents and underwater sellers than others.
Carolyn Sabatelli, an agent for Weichert Realtors in Media, Pa., with 37 years' experience, said she had so much trouble bringing short sales to the settlement table, she thought she was doing something wrong.
Then she attended a short-sale seminar sponsored by Wells Fargo & Co., "and after listening to the complaints of about 200 agents, I realized that it was not me but the system."
Recently, Sabatelli said, she wrote a $299,000 offer from a qualified buyer for a $289,000 short sale. The lender rejected it.
"I know a lot of agents make their living doing short sales, but most of my business is referrals, so I do not need to waste hours on something that can't seem to find the finish line," she said.
Difficulties aside, short sales can be great opportunities, said Long & Foster agent Cheryl Miller.
"Listings have to be priced attractively in order to generate activity; otherwise, buyers pass over them," Miller said.
Even as short sales continue to lag, the number of agents with special credentials for handling such transactions is building.
"There's been a rapid growth in the number of Realtors with the 'Short Sales and Foreclosures Resource' certification," Molony said.
Though the certification was launched at the Realtors association's November convention, by the end of February, 20,000 members had received it, he said.
By Aug. 31, he added, that number exceeded 50,000, making it the "fastest-growing and most popular NAR certification."