Homebuyers Avoiding Distressed Properties Due to Foreclosure Mess

November 23 2010 (Chris Moore)
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The foreclosure mess has caused a noticeable dip in the number of transactions involving REO’s and distressed properties. In October, distressed properties accounted for 44.3 percent of transactions tracked, down from 47.5 percent in September.

Not surprisingly, the drop in overall distressed property sales activity helped produce a decline in average prices for short sales, move-in ready REO and damaged REO in October. At the same time, average prices for non-distressed properties rose.

According to the latest Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions, the ongoing controversy surrounding foreclosures is taking its toll on the housing market as a significant share of home shoppers refused to even look at distressed properties in October.

The closely-watched monthly survey found that 14 percent of owner-occupant homebuyers and six percent of investors refused to view foreclosed properties in October as would be buyers became spooked due to servicing problems that disrupted both short sales and real estate-owned (REO) sales last month.

The survey also revealed that 24 percent of closings scheduled for October were delayed or canceled due to issues with short sales, while 12 percent were delayed or canceled due to REO title issues.

Thomas Popik, research director for Campbell Surveys stated, “It’s clear that decreased homebuyer demand for distressed properties has resulted in lower prices. Homebuyers were squeezed into non-distressed properties that resulted in a higher average price for this type of transaction.”

The news was even worse for for short sale properties, 30 percent of owner-occupant shoppers and 20 percent of investors refused to view such homes.

Tags: foreclosure mess, distressed property, REO, short sales, foreclosed properties, homebuyers, investors, housing market