According to a new report from Realtor.com, short sales are gaining ground as an option for homeowners who might otherwise be headed for foreclosure.
In a short sale, a homeowner who owes more on their mortgage than their home is worth works with their lender to sell the property at a loss. Unlike a foreclosure, a short sale is a voluntary process that requires coordination with a lender to close. Last year, the U.S. had almost 30,000 short sales, making up 28% of total distressed home sales. Short sales have grown more popular in recent years, but there are still twice as many foreclosures—a much more common ending for a distressed sale.
Since 2023, the number of short sale transactions is up by 30%, including a 16% year-over-year gain between 2025 and 2026. In its new report, Realtor.com found that along with their accelerating popularity, short sales have now begun selling for a smaller discount compared to foreclosures, flipping a decade-long pattern in which the opposite was true. A distressed home now commands around 9% more of its estimated value as a short sale rather than a foreclosure.
“Even in a strong economy with home prices close to record highs, a small segment of households find themselves facing tough circumstances,” Realtor.com Chief Economist Danielle Hale said in the report. “The good news for struggling homeowners is that they have more options now than in previous decades.” Hale points out that while short sales can be complex and require a borrower to take initiative, they can prove beneficial down the road compared to the major financial consequences of foreclosing on a home.
While foreclosures are a more popular path in some of the most affordable markets in the country, short sales are more common in mid-range markets across the West and in Florida. According to Realtor.com, Miami, New York, Tampa, Phoenix, and Houston are the leading metros for short sale listings, while Salt Lake City, Austin, and Dallas had the most completed short sales.
While short sales might be an alternative to foreclosure in the right circumstances, some buyers tend to steer clear. Short sales attract around 20% less browsing interest on Realtor.com compared to normal listings and the necessity of a lender’s sign-off means that these sales take roughly 60 days longer to close, if they don’t fall apart first.
Still, for underwater homeowners facing a difficult choice, a short sale can be a compelling path. “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,” Realtor.com’s report observes. While foreclosures are viewed as a personal credit catastrophe, many people see short sales as a way out with less downside, even if credit bureaus actually see them pretty similarly.
“Foreclosures are the more common outcome, but borrowers facing difficulty should consider all of their options,” Hale said. “Engaging with a Realtor agent who specializes in these transactions can be a smart move.”
