10 best cities to buy short sale homes

8. Portland-Vancouver-Beaverton, Ore./Wash. (26.1 percent)

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    Lake Strongheart, of Portland, performs tai chi after sunrise earlier this month in Portland, Ore. The short sale of homes is picking up in the area.
    Rick Bowmer/AP/File
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The Pacific Northwest is a pricier housing market that Phoenix, with fewer homes available. The area sold only 679 pre-foreclosure homes in the fourth quarter, which is the third-lowest number on the list (the minimum for inclusion is 500 homes). Still, that's up 37.2 percent from 2010, and a willing buyer can get a short sale home for an average price of $190,042, which represents an average discount of 26.1 percent below market value.

While losing a house is never something to wish for, underwater homeowners see a significant advantage to avoiding foreclosure through short sale. For one, they get a say in deciding to sell the house, instead of letting it fall to the lender. "It's also an advantage to their credit," says Blumquist. "It's not great, but it's better than foreclosure."

"From an ethical standpoint, they are doing the right thing by gracefully exiting that property that they can't afford and allowing it to go to a new homeowner," he adds. "That's helping out the neighborhood, too."

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