Transactions Grew for the Third Straight Year But Remain a Small Slice of the Market, According to a New Realtor.com® Report
AUSTIN, Texas, July 16, 2026 /PRNewswire/ -- A new report from Realtor.com® finds that short sales, an alternative to foreclosure for underwater homeowners, are growing. Short sales remain a small slice of the market: fewer than 30,000 took place in the U.S. in 2025, accounting for roughly 0.6% of all typical home sales and 28% of distressed sales. Short-sale transactions rose 4% from 2023 to 2024, nearly 10% from 2024 to 2025, and about 16% year over year in the first quarter of 2026, accelerating across these three years. Even so, short sales are not the most common distressed sale, trailing foreclosures by more than two to one.
This report also found that starting in January 2026, for the first time since Realtor.com® began tracking these valuations in 2018, short sales started selling at a smaller discount than foreclosures. Distressed homes now fetch roughly 9% more of their estimated value as a short sale than as a foreclosure, a reversal of a pattern that held for nearly a decade.
Short sales let a homeowner who owes more than their home is worth sell the property for less than the remaining mortgage balance, with the lender's approval. Nearly 30,000 short sales took place in the U.S. in 2025, accounting for roughly 0.6% of all arms-length home sales and 28% of distressed sales. Despite offering real advantages for both lenders and homeowners, short sales remain far less common than foreclosures, trailing them by more than two to one.
"Even in a strong economy with home prices close to record highs, a small segment of households find themselves facing tough circumstances," said Danielle Hale, chief economist, Realtor.com®. "The good news for struggling homeowners is that they have more options now than in previous decades. A short-sale can be complicated and requires borrowers to act before the bank forces their hand; however, it benefits them by shortening the waiting period before they can qualify for a future mortgage. Foreclosures are the more common outcome, but borrowers facing difficulty should consider all of their options. Engaging with a Realtor agent who specializes in these transactions can be a smart move."
A Decade-Long Bargain, Reversed
For most of the past decade, short sales sold at a steeper discount to their estimated value than foreclosures did. Foreclosed homes sold in a fairly steady range, 25% to 30% below estimated value, year after year. The short-sale discount swung far more widely, starting around 30% in 2018, ballooning to 50% in 2022, and narrowing to roughly 20% by early 2026 as the market cooled.
The swing traces back to timing. A foreclosed home is priced by the lender the moment it sells, so its discount tracks the market in real time. A short sale is priced earlier, while the homeowner still owns it, and often sits in pending status for months while the lender decides whether to accept less than it's owed. During the rapid price run-up of 2021 and 2022, homes appreciated faster than these drawn-out deals could close, pushing short-sale discounts to their widest point. As price growth flattened in 2025 and 2026, that lag faded and the discount snapped back.
Research from the Federal Reserve Bank of Philadelphia examining the 2007-2012 housing crash found short sales sold for roughly 9% to 10% more than comparable foreclosures during that period, suggesting the current premium is less a new development than a return to the historical norm.
Why Short Sales Stay Rare
The reversal is unlikely to change how few homeowners choose a short sale. "A short sale recovers more value for the lender and does less damage to the surrounding neighborhood, but the decision isn't the lender's to make," said Glen Morgenstern, economist intern at Realtor.com®. "The homeowner controls the outcome, and a foreclosure lets them stay in the home without paying for 592 days on average. That free housing is worth more than any credit or timeline advantage a short sale offers, and the new pricing math doesn't touch that calculation."
A short sale ends earlier and requires the homeowner to actively cooperate in their own move. Short sales can release a homeowner from leftover mortgage debt and let them qualify for a new mortgage in about four years rather than seven, and while a short sale is widely believed to be gentler on a seller's credit than foreclosure, credit bureaus score the two similarly.
The ratio of short sales to foreclosures has never reached parity since Realtor.com's records began in 2006. It climbed as the 2010 Home Affordable Foreclosure Alternatives program pushed short sales as an alternative, then slid after that program ended in 2016. It has since settled at roughly four short sales for every ten foreclosures.
A Different Map Than Foreclosures
Short sales also cluster differently than foreclosures. Foreclosures concentrate in the country's most affordable markets, while short sales are scattered across moderately priced metros in the West and Florida. As of May 2026, Miami, New York, Tampa, Phoenix and Houston had the most short-sale listings. By share of listings, Lakeland, Florida led the country at 6.7%, followed by Pueblo and Colorado Springs, Colorado. Measured by completed sales, short sales are most common in Salt Lake City and Texas metros such as Austin and Dallas.
Buyers remain wary of the format. Short-sale listings draw roughly 20% fewer page views on Realtor.com than comparable homes and take about two months longer to sell, weighed down by lender approval timelines that can drag on for months and sometimes collapse before closing.
Methodology
Short sales are identified as those carrying the short-sale flag in Realtor.com deed records, and foreclosures as those carrying the REO (real estate-owned) flag, covering single-family homes, condos, townhomes, row homes and co-ops sold since 2001. Short-sale prevalence is measured both as a share of all home sales and as a share of distressed sales (short sales plus foreclosures). Short-sale listings are identified by the short-sale flag in Realtor.com listing data, consistently populated beginning in 2019.
To measure the price discount, each distressed sale price is compared against the property's estimated value from an automated valuation model, taken as the median of that property's valuations in the month three months before the sale. The discount is the percentage by which the sale price falls below that value, measured the same way for short sales and foreclosures. The short-sale premium over foreclosures is the difference between the two groups' discounts. Listing performance metrics compare each listing's statistics against the medians for its property type and ZIP code, or metro area where a ZIP has fewer than 50 listings. Sales figures reflect data through March 2026.
About Realtor.com®
For over 30 years, Realtor.com® has connected buyers, sellers, and renters with trusted insights, professional guidance and powerful tools to help them find their perfect home. Recognized as the No. 1 real estate site REALTOR® agents recommend, Realtor.com® delivers consumer connections and a robust suite of marketing tools to support business growth. Realtor.com® is operated by News Corp [Nasdaq: NWS, NWSA] [ASX: NWS, NWSLV] subsidiary Move, Inc.
Media Contact: Mallory Micetich, [email protected]
SOURCE Realtor.com
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