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Foreclosure rates down year over year, short sales on the rise

As economic reports stream in, the status of the national and local real estate market is in a state of flux, which means there is still some uncertainty. A recent report issued by RealtyTrac, a national authority on real estate statistics, shows that foreclosures are down over the last year nationally, but rates still remain high in South Carolina.

According to the report, foreclosure filings last month dropped about 4 percent as compared to May 2011. This news comes even as initial notices of foreclosure increased, but home seizures simultaneously dropped. Analysts believe this is a result of short sales becoming an increasingly popular option for mortgage lenders. This opinion is bolstered by the fact that homes sold in short sales made, on average, $27,000 more than foreclosed properties.

The idea is that banks are continuing to realize the relative benefits of choosing short sales over foreclosures. By choosing this route, banks -- and homeowners -- minimize their losses. The prediction is that as initial notices of foreclosures rise, a growing number of those will be converted into short sales.

Locally, foreclosure rates remain relatively high in South Carolina. Though our state did not top the list for foreclosures for the month of May 2012, it still had the eighth highest rate. This is another indication that many South Carolinians are searching for options to emerge from the financial problems with the least amount of harm done. In some cases, pushing for a short sale, versus foreclosure, can limit the impact on personal credit scores and allow banks to recover more on the borrower's financial obligation.

As the economy, both locally and nationally, continues to show mixed signals of a recovery, it is important for distressed homeowners to be aware of all their options should their mortgage lender initiate the foreclosure process. The important thing to remember is that there are feasible alternatives to foreclosure available.

Source: Bloomberg, "U.S. Foreclosure Filings Fall 4% as Lenders Increase Short Sales," Dan Levy, June 13, 2012

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