Lenders Approving More Short Sales, Pricing Aggressively
Sales of distressed properties once again accounted for more than a quarter of all home sales during the first quarter of 2012. Twenty-six percent of residential real estate sales during the quarter were of homes that were in some stage of foreclosure or bank-owned (REO). This is up from 22 percent of sales in the fourth quarter of 2011 and a slight increase from the first quarter of 2011 when distressed properties held a 25 percent market share.</p
RealtyTrac, which released its first quarter Foreclosure Sales ReportTM Thursday morning, said that a total of 233,299 residential properties that were pre- or post-foreclosure sold during the quarter, an increase of 8 percent from the previous quarter and virtually unchanged from one year earlier. </p
Pre-foreclosures sales, usually short-sales in which the bank agrees to take less than the full payoff of the mortgage, increased 16 percent from the previous quarter and 25 percent on an annual basis. There were a total of 109,521 pre-foreclosure sales during the quarter, the highest number since the first quarter of 2009, and they accounted for 12 percent of all sales during the quarter. In the fourth quarter of 2011 these sales took a 10 percent market share and 9 percent one year earlier. </p
Banks sold 123,778 homes out of their REO inventory during the quarter, a 2 percent increase from the fourth quarter but down 15 percent year-over-year. REO sales accounted for 14 percent of all sales compared to 13 and 15 percent of sales in the previous periods.</p
“Foreclosure-related sales picked up in the first quarter, particularly pre-foreclosure sales where a distressed homeowner is selling to avoid foreclosure – typically via short sale,” said Brandon Moore, chief executive officer of RealtyTrac. “Those pre-foreclosure sales hit a three-year high in the first quarter even as the average pre-foreclosure sales price dropped to a record low for our report. Lenders are approving more aggressively priced short sales, which in turn is resulting in more successful short sale transactions.</p
“Meanwhile the average price of a bank-owned home is stabilizing and even increasing in some areas where a slowdown in REO activity over the past year has resulted in a restricted supply of REO homes available,” Moore continued. “Still, REO sales did increase on a quarterly basis in 21 states, indicating that lenders are still working through a bottleneck of unsold REO inventory in many areas.” </p
The average sales price of homes sold pre-foreclosure or out of ORE was $161,214, 1 percent lower than the previous quarter and down 2 percent on an annual basis. This represented a discount of 27 percent from the average price of non-distressed properties, unchanged from the fourth quarter and down from a 29 percent discount a year earlier.</p
There was a significant difference between the average price paid pre-foreclosure and for REO. The average pre-foreclosure or short-sale price was $175,461 compared to $147,995 for a bank-owned property. The short sale price was down 4 percent from Quarter 4 and 10 percent from a year earlier and was the lowest average price for a short sale since RealtyTrac started tracking them in 2005. The REO figure was essentially unchanged from the previous quarter and down only 2 percent on an annual basis.</p
Pre-foreclosure sales typically gave buyers a 21 percent discount from a market-priced home in the first quarter compared to 19 percent and 16 percent in the two earlier periods. The discount for REO was 33 percent, down from 34 percent and 37 percent respectively.</p
It took a home that sold pre-foreclosure an average of 306 days to sell once the foreclosure process began compared to 256 days a year earlier. REOs sold in an average of 178 days after completing the foreclosure process, an increase of less than half a week from the earlier periods.</p
Pre-foreclosure sales increased on an annual basis in 27 states with dramatic increases in several such as Wisconsin (94 percent), Michigan (81 percent), and Georgia (80 percent.) REO sales were up in 21 states with Oregon (41 percent), North Carolina (23 percent), and Ohio (21 percent) showing the greatest year-over-year increases.
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