One in four homes was in foreclosure, RealtyTrac says
Short sales becoming preferred method for banks to dispose of defaulting properties
As a reminder of the bleak U.S. housing market, RealtyTrac reports that
homes in some stage of foreclosure accounted for nearly one in four
homes sales during the fourth quarter.
Distressed properties continue to make up a large portion of the sales inventory in many housing markets. In Nevada, they accounted for 56 percent of all sales during the quarter, the highest percentage of any state.
Altogether, 204,080 distressed properties were purchased during the fourth quarter, down two percent from the year-ago quarter. For all of 2011, foreclosure-related sales were down two percent year-over year to 907,138, accounting for 23 percent of all home sales.
"Sales of foreclosures in the fourth quarter continued to be slowed by questions surrounding proper foreclosure paperwork and procedures," Brandon Moore, chief executive officer of RealtyTrac says. Moore referred to the delays cause by the "robo-signing" scandal in late 2010. "Even so, foreclosures accounted for nearly one in every four sales during the quarter and for the entire year.
"We expect to see foreclosure-related sales increase in 2012, particularly pre-foreclosure sales, as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock over the past 18 months," Moore says.
Reflecting this trend, short sales have become the preferred method for banks to dispose of properties in default. In short sales, borrowers who owe more on their mortgages than their homes are worth agree with their bank to sell their homes at the lower market value. In return, the bank agrees to absorb the loss.
During the last quarter of 2011, there were more than 88,000 short sales, up 15 percent compared with a year earlier. Short sales accounted 10 percent of all homes sold during the quarter.
Sales of bank-owned homes fell 12 percent year-over-year to 116,000, comprising 13 percent of all sales during the quarter.
"That trend will likely show up in more local markets in 2012 as lenders recognize short sales as a better option for many of their non-performing loans," Moore says.
Short sales have become a far more viable choice since all parties agree on the terms, leading to fewer legal issues, said Daren Blomquist, RealtyTrac's director of marketing.
Short sales also offer better returns. During the quarter, the average short sale sold for $184,221, while the average foreclosure sold for $149,686. Banks typically don't need to spend a lot of money maintaining a short sale home like they do a foreclosure, where they have to pay more in legal fees, property taxes, maintenance and insurance, Blomquist says.
Short sale deals also get completed more quickly. During the fourth quarter, it took an average of 308 days, to complete a short sale. Foreclosures, meanwhile, can take years to complete.
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