REO, short sales sag

The expiration of the homebuyer tax credit and the robo-signing controversy dented sales of bank-owned and foreclosed homes during the third quarter, but those willing to brave the uncertain environment picked up deals not seen in nearly five years, data aggregator RealtyTrac said.

RealtyTrac estimates that sales of bank-owned (REO) homes in July, August and September fell 26 percent compared to the second quarter and were down 35 percent from the same quarter a year ago, to 113,933.

That’s partly a reflection of the fact that home sales were down across the board — REO sales still accounted for 15 percent of all sales in the third quarter, the same as the previous quarter and only slightly below the 16 percent market share of a year ago.

REOs sold for an average discount of nearly 41 percent, up from an average discount of 34 percent in the previous quarter and 35 percent a year ago, RealtyTrac said.

Another 74,815 homes that were in the foreclosure process — either in default or scheduled for auction — sold during the third quarter, down 24 percent from the previous quarter and from a year ago. Pre-auction sales of homes in the foreclosure process accounted for nearly 10 percent of all sales, up slightly from 9 percent in the second quarter and 9 percent a year ago.

Those homes, which typically changed hands in a short sale, sold for an average discount of 19 percent, up from 13 percent in the previous quarter and 18 percent a year ago, RealtyTrac said.

All told, sales of REOs and pre-auction sales of homes in foreclosure fell 25 percent from the second quarter and 31 percent from a year ago, to 188,748. The average discount on those properties was more than 32 percent — the highest since fourth-quarter 2005, RealtyTrac said.

"The foreclosure-processing controversy, which was brought to light at the very end of the third quarter, could chill demand even further, particularly for foreclosure properties," said RealtyTrac CEO James Saccacio in a statement.

The latest numbers from mortgage-data aggregator Lender Processing Services showed about 80,000 homes in the foreclosure process were either sold to investors or added to bank’s REO inventories in October, down from a 2010 high of 124,000 in September.

RealtyTrac does not include transfers of properties from owners in default to the foreclosing bank or lender’s REO inventory as foreclosure sales.

RealtyTrac estimates the discount on foreclosure sales by calculating the percentage difference between the average sales price of foreclosure sales (REOs and homes in foreclosure) — and the average sales price of non-foreclosure sales during the quarter.

States posting the highest foreclosure discounts were Ohio (45 percent), Kentucky (44 percent), Tennessee (42 percent), Illinois (41 percent), New Jersey (41 percent), Michigan (41 percent), Pennsylvania (40 percent) and Georgia (40 percent).

Sales of REO and foreclosed homes accounted for 25 percent of all U.S. residential sales during the quarter, and an even greater proportion in Nevada (54 percent), Arizona (47 percent), California (40 percent), Florida (37 percent), Massachusetts (35 percent), Michigan (32 percent), Georgia (29 percent), and Oregon (27 percent).

Top 10 states for foreclosure sales

Source: RealtyTrac