Not only are short sales nearly as prevalent as foreclosures in many markets today, they also are selling at discounts almost as great as foreclosures. Both forms of distress sales are selling at discounts greater than six months ago.

Even though both short sales and foreclosures are hard to find these days and selling quickly, (See Move-in Ready Foreclosures Dry Up), discounts for short sales rose to a national average of 22 percent in April, up from 18 percent in April 2009. National average discounts for foreclosures rose to 25 percent, the same level as April 2009 and a one point increase above January, according to new data from Lender Processing Services.

Though inventories of both foreclosures and short sales are generally low, move-in ready properties, which sell at the least discount from normal listings, are the most difficult to find today. The LPS numbers may reflect a greater percentage of deeply discounted damaged properties that require significant expenditures to restore to move-in conditions.

Lengthy delays in processing foreclosures in the wake of Robogate scandal, new federal rules designed to speed up the short sale process, the prevalence of software platforms for short sales and a gradual acceptance of short sales by lenders has made the process of selling homes for less than their mortgage principal easier and more popular. Bank of America is even offering some struggling homeowners payments of up to $30,000 if they sell their homes in a short sale and avoid ending up in foreclosure.

Once a rarity, pre-foreclosure sales, almost all short sales are expected to rise this year, to as many as 400,000 by the end of 2012, about the same level as foreclosure sales.

In its report on April transactions, LPS also said that home prices have risen 2.5 percent so far this year, a faster rise than the nation has seen since October 2005. The increase in LPS’ Home Price Index since the recent low seen in January 2012 has been the most significant since the market peak in 2005. This increase represents an annualized rate of 13.1 percent per year.

Prices increased in 563 of the 579 metropolitan statistical areas (MSAs) covered by LPS data during April, and in the remaining 16 MSAs, prices fell less than 0.2 percent. Only two major MSAs saw a slight price decrease – Los Angeles and Hartford, Conn. – declining 0.04 and 0.03 percent, respectively.