Short Sales Up 19pc in Q2 2011

August 25, 2011 / Russell Legato, Residential Property Analyst

Homes in short sales or bank owned have accounted for 31 percent of all U.S. residential sales in the second quarter of 2011, down from 36 percent of all sales in the first quarter, though up from 24 percent of all sales in the second quarter of 2010.

Short Sales Up 19pc in Q2 2011

This was according to a foreclosure sales report released by online marketplace for foreclosure homes, RealtyTrac, seemingly threatening the 40 percent fall in foreclosures to over 222,000 units in June 2011 beginning fall last year, as reported by the online marketplace.

Sales of real estate in some stage of foreclosure (NOD, LIS, NTS, NFS) or bank-owned (REO) decreased from a year ago in terms of raw numbers despite a robust share of total shares from a year ago.

Third parties purchased a total of 265,087 homes in foreclosure or bank owned nationwide in the second quarter, up 6 percent from a revised first quarter total but still down 11 percent from the second quarter of 2010.

The average sales price of homes in foreclosure or bank owned was $164,217 in the second quarter, down less than 1 percent from the first quarter and down nearly 5 percent from the second quarter of 2010. The average sales price for homes in foreclosure or bank owned was 32 percent below the average sales price of homes not 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.

“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.”

A total of 102,407 pre-foreclosure homes — in default or scheduled for auction — sold to third parties in the second quarter, an increase of 19 percent from the previous quarter but still down 12 percent from the second quarter of 2010, accounting for 12 percent of all sales, the same percentage as in the first quarter but up from 10 percent of all sales in the second quarter of 2010.

Some of the states with the biggest quarterly increases in pre-foreclosure home sales included Nevada with a 43 percent increase, Washington with a 39 percent increase, California with a 38 percent increase, and Texas with a 34 percent increase, RealtyTrac noted.

Pre-foreclosures, which are often sold via short sale, had an average sales price nationwide of $192,129, a discount of 21 percent below the average sales price of non-foreclosure homes but up from a 17 percent discount in the previous quarter and a 14 percent discount in the second quarter of 2010. Pre-foreclosures sold in the second quarter took an average of 245 days to sell after receiving the initial foreclosure notice, down from an average of 256 days in the first quarter — following three straight quarters of increases in the average time to sell pre-foreclosures.

A total of 162,680 bankClick for larger image-owned (REO) homes sold to third parties in the second quarter, in keeping with the 162,900 in the first quarter and down 10 percent from the second quarter of 2010. REO sales accounted for 19 percent of all sales in the second quarter, down from 23 percent of all sales in the first quarter but up from 15 percent of all sales in the second quarter of 2010.

Nationally, REOs had an average sales price of $145,211, a discount of nearly 40 percent below the average sales price of non-foreclosure homes. This is an increase from a 36 percent discount in the previous quarter and a 34 percent discount in the second quarter of 2010. REOs that sold in the second quarter took an average of 178 days to sell after being foreclosed on, up from 176 days in the first quarter and up from 164 days in the second quarter of 2010.

Meanwhile, foreclosure-related sales accounted for 65 percent of all residential sales in Nevada during the second quarter, the highest percentage of any state according to RealtyTrac. Third parties purchased a total of 15,685 homes in foreclosure or bank owned in Nevada during the second quarter, up 24 percent from the first quarter and up 31 percent from the second quarter of 2010.

Arizona foreclosure-related sales also increased on a quarterly and annual basis, accounting for 57 percent of all sales in the state during the second quarter — the second highest percentage of any state.

Third parties purchased a total of 69,897 homes in foreclosure or bank owned in California during the second quarter, 51 percent of all sales in the state. Foreclosure-related sales in California increased 12 percent from the first quarter but were virtually unchanged from the second quarter of 2010.

Michigan foreclosure-related sales accounted for 41 percent of all sales in the state during the second quarter, the fourth highest percentage among the states, and Georgia foreclosure-related sales accounted for 38 percent of all sales in the state during the second quarter, the fifth highest percentage.

Other states where foreclosure-related sales accounted for at least 30 percent of all sales were Colorado (36 percent), Florida (35 percent), Illinois (34 percent), Oregon (33 percent), and Idaho (30 percent).

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