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Distressed Properties Nearly a Quarter of 2011 Real Estate Sales

by devteam March 1st, 2012 | Share

Sales ofrndistressed real estate made up nearly a quarter of all single-familyrnresidential sales both in the fourth quarter of 2011 and the entire yearrnaccording to information released today by RealtyTrac. Homes that were in somernstage of foreclosure or lender-owned (REO) comprised 24 percent of the marketrnin the fourth quarter compared to 20 percent in the third quarter.  Pre-foreclosure sales and sales of REOrnrepresented 23 percent of all sales during the year compared to 25 percent inrn2010.</p

RealtyTrac,rnthe Irvine, California company that tracks foreclosures nationwide, reportedrnthat 204,080 residential properties in some stage of foreclosure or held in REOrnwere sold to third parties during the fourth quarter, down 8 percent from thernthird quarter and 2 percent from the same period in 2010.  Total foreclosure related sales in 2011rntotaled 907,138, down 2 percent from 2010. </p

“Sales of foreclosures in the fourthrnquarter continued to be slowed by questions surrounding proper foreclosurernpaperwork and procedures,” said Brandon Moore, chief executive officer ofrnRealtyTrac. “Even so, foreclosures accounted for nearly one in every four salesrnduring the quarter and for the entire year. We expect to seernforeclosure-related sales increase in 2012, particularly pre-foreclosure sales,rnas lenders start to more aggressively dispose of distressed assets held up byrnthe mortgage servicing gridlock over the past 18 months.</p

Homes purchased pre-foreclosure,rni.e. short sales, totaled 88,303, about one-third of foreclosure relatedrnsales.  This was down five percent fewerrnthan in the previous quarter but a 15 percent year-over-year increase.  Pre-foreclosure sales were 10 percent of thernmarket in Quarter Four and 9 percent over the course of the year. </p

Distressed sales had an averagernprice of $164,944, little changed from Quarter Three and down 5 percent fromrnone year earlier.  Distressed propertiesrntypically sold at a 29 percent discount compared to a sale of a non-foreclosurernrelated property during the quarter.  Therndiscount in the third quarter had averaged 34 percent and one year ago it wasrn35 percent.  Pre-foreclosure sales soldrnfor an average of $184,221 in the fourth quarter, 21 percent below the averagernprice of a non-foreclosure home.  REOsrnsold for an average of $149,686 in the fourth quarter, up 2 percent from thernprevious quarter but down 2 percent from the fourth quarter of 2010. Thernaverage sales price of a bank-owned home in the fourth quarter was 36 percentrnbelow the average sales price of a non-foreclosure home, while the discount onrnbank-owned homes for the entire year was 40 percent.</p

“We continued to see a shift towardrnpre-foreclosure sales, or short sales, and away from REO sales in the fourthrnquarter,” Moore continued. “Nationally, pre-foreclosure sales increased 15rnpercent from a year ago while REO sales decreased 12 percent.  Pre-foreclosure sales outnumbered REO sales inrnseveral bellwether markets, including Los Angeles, Miami and Phoenix, where REOrnsales had outnumbered pre-foreclosure sales a year ago. That trend will likelyrnshow up in more local markets in 2012 as lenders recognize short sales as arnbetter option for many of their non-performing loans.” </p

Pre-foreclosure sales increasedrndramatically year-over-year in several states, more than doubling in Michigan (+103rnpercent.)  Other states with bigrnincreases were Georgia (+59 percent), Arizona (+48 percent), and Washingtonrn(+36 percent.)  Year-over-year increasesrnin REO were less striking but several states did see significant jumps.  Sales in Minnesota increased 65 percent,rnWisconsin 23 percent, Washington 21 percent, and Illinois 20 percent.</p

Homes that sold pre-foreclosure inrnthe fourth quarter had been in the foreclosure process for an average of 308rndays compared to an average of 237 days in the fourth quarter of 2010.  REOs that sold in the fourth quarter took anrnaverage of 175 days to sell after completing the foreclosure process, comparedrnto 171 days in the fourth quarter of 2010. </p

During 2011 the states with thernhighest percentage of real estate sales that were foreclosure related werernNevada (54 percent), California (43.5), and Georgia (36 percent).   

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About the Author

devteam

Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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