Short sales up 29 percent in Philadelphia

A new trend could be good news to both real estate buyers and sellers in Philadelphia.

An analysis by Philadelphia Controller Alan Butkovitz says short sales are up 29 percent in the city this year compared with 2010. Short sales happen when homeowners facing foreclosure sell their house for less than they owe on their mortgage.

Daren Blomquist, vice president of the firm RealtyTrac, says that’s no surprise since foreclosures are up and banks don’t want to own real estate.

“Once the banks are starting the foreclosure process. it’s now much more likely that they will agree to allow a short sale of that property rather than complete the foreclosure and take back the property themselves,” Blomquist says.

Blomquist says a short sale gives buyers a discount as well as helping troubled sellers salvage their credit.

“Usually you can recover and be in a place to buy a property again within two or three years after a short sale is on your credit history. But when it’s a foreclosure, it’s typically five to seven years before your credit is restored,”  he said

A federal tax change also makes short sales more attractive this year.  Beginning in 2013, the amount still owed on the mortgage that the bank forgives after a short sale will be considered taxable income.