The world of distress sales deals is changing. First it was REOs. Then foreclosures bought at auction. Now, short sales are showing signs that soon they’ll be going to way of the Stegosaurus.

Buried in a release from Lender Processor Services last week was a notation that the number of short sales has fallen 60 percent from a year ago, a fall from grace twice as steep as distress sales overall. A little research confirmed the LPS report.

The California Association of Realtors reported that short sales fell to just 11.6 percent of distress sales in July, the lowest point since April 2009. July’s figure was down from 12.9 percent in June and was about half of what it was a year ago, when short sales made up 22.7 percent of all sales. Due its higher price structure, California is home to a disproportionate share of short sales. In California, 60% of short sale offers failed to result in a closed sale last year, according to a CAR member survey.

RealtyTrac reported that short sales in June accounted for 14 percent of all residential sales, down from 15 percent in May but up from 8 percent a year ago.

The National Association of Realtors reported short sales have lost half their market share in the past year falling to just 6 percent of total sales in July, down from 12 percent in July 2012.

What makes the sudden downturn in short sales more difficult to understand is the steps that have been taken to reduce the painfully long short sales time line by FHFA, Fannie and Freddie and leading lenders from Bank of America to Wells and many others.

Between seller, buyers, first and second trust lenders, buyer’s agent and lender, seller’s agent, attorneys, and …read more