Where have all the short sales gone?

One in seven Orange County homes sold through the broker-run multiple listing service this year was a “short sale,” or sold for less than was owed on the mortgage.

That’s down from one in four over the previous three years, the California Regional Multiple Listing Service reported recently.

In all, 1,805 transactions occurring from January through May were for less than the mortgage, down 41 percent from a year ago. By comparison, Orange County averaged almost 2,900 short sales in that period during the three previous years.

Among the possible explanations: Rising home prices transformed many would-be short sales into sales for more than the mortgage, closing costs and commissions, industry insiders said.

More than 112,000 Orange County homes — a fifth of all local homes with a mortgage — ended up “under water” by the end of 2011, CoreLogic figures show. As of March of this year, underwater homes here fell to under 61,000, or just over one-tenth of all homes with a mortgage.

“They’re now able to sell as standard sales,” said Chris Diaz, founder Charis Financial Inc. in Irvine, a short sale consulting firm. “They didn’t have to do a short sale.”

Other alternatives, such as loan modifications, also are becoming more common, one agent said.

Some underwater homeowners also may be holding on for higher prices, either in hopes that their homes soon will be worth more than the mortgage or simply because they can afford their current house payments. Others may have given up hope and are just waiting for the bank to come take back the home.

Under a short sale, a lender lets a homeowner walk away from an unpaid portion of their mortgage after a drop in property values.

Lenders began to ramp up short sale approvals in recent years since they often get more money – and fewer home repairs – than when they repossess properties and go through the hassle of reselling them.

Nearly 26,600 Orange County homes were sold as short sales from 2009 through 2012, MLS figures show.

Short sales peaked at 7,775 in 2012, with 3,055 occurring during the January through May period, according to the MLS.

Diaz said his firm’s inventory of underwater properties fell to 60 homes this month, down from 195 in September.

“We sold the old ones, and there was just no new ones to be had,” he said.

Diaz suspects that some homeowners merely are waiting for lenders to seize their properties, either because the process is too complicated or because they want to put off paying rent on a new home as long as possible.

“Most people who were motivated to start over have done that, and the other people who are there may be trying to hold onto their homes whatever the cost,” he said.

Staci Treloggen Saunders, a foreclosure specialist with Prudential California Realty, noted that loan servicers are pushing hard to get delinquent homeowners to surrender their deeds. Loan modifications also are getting easier and more streamlined, she said.

The transfer of some loans to new servicers also slowed things down as servicers got up to speed.

Patrick Bartolic, an Evergreen Realty agent specializing in distressed properties, suspects also that bulk sales of distressed homes to hedge funds and institutional investors accounts for the overall decline in distressed properties for sale.

Bank-owned, foreclosed homes fell 68 percent to 598 in the first five months of this year, MLS figures show.

“It’s sort of an anomaly,” Bartolic said. “In January 2012, we had one year of distressed inventory. One and a half years later, depending on the market, we have 18 to 30 days inventory.”

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