Short Sales Rise as Homeowners Avoid Foreclosure

Short sales, a real estate transaction where a distressed homeowner sells their property for less than the outstanding mortgage balance, are gradually increasing as homeowners seek to avoid foreclosure. In these transactions, lenders agree to accept a reduced amount to recoup a portion of the debt faster and avoid the lengthy foreclosure process. While short sales are voluntary, foreclosures are involuntary and occur when lenders repossess and sell a property after a homeowner defaults on payments.

According to a Realtor.com® report released this week, foreclosures still outnumber short sales by more than a 2-to-1 margin, and total short sales remain low nationwide compared to historical levels. The peak for short sales occurred in 2012, when nearly 9% of the housing market consisted of these transactions, driven by homeowners with negative equity and supported by lender programs like the Home Affordable Foreclosure Alternatives initiative. This trend subsided as the market recovered and homeowners rebuilt equity.

In 2025, nearly 30,000 short sales were recorded across the U.S., representing 0.6% of all conventional closings and 28% of distressed home sales. This figure is significantly lower than the 2012 peak. Glen Morgenstern, an economist intern at Realtor.com, explained that as the market recovered, equity increased, leading to a decline in both short sales and foreclosures, and the winding down of crisis-era programs. He noted that while short sales currently represent a small segment of the market, their volume is growing.

Between 2023 and 2024, short-sale transactions saw a 4% increase, with the pace accelerating since then. This uptick suggests a growing trend of homeowners opting for short sales as a strategy to manage their financial distress and prevent foreclosure, particularly in mid-priced markets which are experiencing the highest concentration of these deals.