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Factors underlying short sales

Author

Listed:
  • Zhu, Shuang
  • Pace, R. Kelley

Abstract

The short sale process has emerged as the most common alternative to the traditional foreclosure process in the recent mortgage crisis. This paper examines the factors that affect the liquidation outcome between these two ways of disposing the housing asset. We find that better quality borrowers such as those with higher credit scores and with full documentation status are more likely to prefer and obtain approval of short sales, involvement of mortgage insurance firms and second lien holders reduces short sales, and that state foreclosure laws such as longer foreclosure delay and the statutory right of redemption reduce short sales. The results have implications for ostensibly borrower-friendly measures promoted by governmental entities.

Suggested Citation

  • Zhu, Shuang & Pace, R. Kelley, 2015. "Factors underlying short sales," Journal of Housing Economics, Elsevier, vol. 27(C), pages 60-70.
  • Handle: RePEc:eee:jhouse:v:27:y:2015:i:c:p:60-70
    DOI: 10.1016/j.jhe.2015.02.001
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    References listed on IDEAS

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    1. Karen M. Pence, 2006. "Foreclosing on Opportunity: State Laws and Mortgage Credit," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 177-182, February.
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    8. Ambrose, Brent W & Buttimer, Richard J, Jr & Capone, Charles A, 1997. "Pricing Mortgage Default and Foreclosure Delay," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(3), pages 314-325, August.
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    Cited by:

    1. Aidong Adam Ding & Shaonan Tian & Yan Yu & Xinlei Zhao, 2022. "Does judicial foreclosure procedure help delinquent subprime mortgage borrowers?," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 19(2), pages 382-422, June.

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    More about this item

    Keywords

    Short sale; Foreclosure; Mortgage default; State foreclosure law; Real estate liquidation;
    All these keywords.

    JEL classification:

    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)
    • K11 - Law and Economics - - Basic Areas of Law - - - Property Law
    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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