August 25, 2011 (Jeff Alan)
Short sales increased 19 percent in the second quarter of 2011, accounting for 12 percent of all sales nationwide while the number of bank-owned (REO) sales remained flat according to the Q2 2011 U.S. Foreclosure Sales Report released by RealtyTrac.
A total of 102,407 short sales were made in the second quarter of 2011, which was still 12 percent lower than the second quarter of 2010. The states that posted the largest increases in short sales were Nevada (43%), Washington (39%), California (38%), and Texas (34%).
Distressed property sales, including foreclosure sales and short sales, accounted for 31 percent of all U.S. residential sales in the second quarter, down from nearly 36 percent in the first quarter but up from 24 percent from the same quarter last year.
The average sales price for a distressed property in the second quarter was $164,217, down less than one percent from the first quarter and down nearly five percent from the same quarter in 2010. Distressed properties typically sold for 32 percent below the average price of a home not sold in foreclosure.
“With average prices on distressed real estate trending down and average discounts trending up, this report is clearly good news for well-positioned buyers and investors looking for bargain real estate that will build them wealth in the long term and often cash flow as rental real estate in the short term,” said James Saccacio chief executive officer of RealtyTrac. “Maybe less evident, however, is the good news in this report for distressed homeowners looking to sell, and even lenders saddled with large portfolios of delinquent loans.”
Meanwhile, banks may have finally realized the benefit of selling distressed properties through a short sale instead of letting the property go through the full foreclosure process as the average price for a home sold in a short sale was $192,129 in the second quarter, 21 percent below the average price of a non-foreclosed home, while the average price for a home sold in foreclosure or as a REO was $145,211, nearly 40 percent lower than a non-foreclosed home.
“The jump in pre-foreclosure sales volume coupled with bigger discounts on pre-foreclosures and a shorter average time to sell pre-foreclosures all point to a housing market that is starting to focus on more efficiently clearing distressed inventory through more streamlined short sales — at least in some areas,” Saccacio continued. “This gives distressed homeowners who do not qualify for loan modification or refinancing — or who are not interested in those options and want to sell — a better chance of completing a short sale to avoid foreclosure. Streamlined short sales also give lenders the opportunity to more pre-emptively purge non-performing loans from their portfolios and avoid the long, costly and increasingly messy process of foreclosure and the subsequent sale of an REO — which may end up selling for a lower price than it would have as a pre-foreclosure short sale and in the meantime further stresses already overloaded REO departments.”
The average time it took to sell a short sale after receiving the initial foreclosure notice declined from an average of 256 days in the first quarter to 245 in the second quarter while REOs increased from an average of 176 days in the first quarter to 178 days in the second quarter and up from 164 days a year earlier.
Nevada had the highest percentage of distressed property sales of any state with 65 percent of all residential sales being distressed properties. Arizona had the second highest at 57 percent and California was third at 51 percent.
Rounding out the top ten was Michigan (41%), Georgia (38%), Colorado (36%), Florida (35%), Illinois (34%), Oregon (33%), and Idaho (30%).
Tags: RealtyTrac, Quarterly Foreclosure Sales Report, short sales, distressed properties, foreclosures, REO, residential sales