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Short Sales Overtake Forclosed Properties For The First Time

News Posted On: 07 December 2012

For the first time since anyone cared short sales have overtaken bank-owned property sales in America, as the recovery prompts more buyers to take action early in the process rather than risk missing out.

According to the latest data from RealtyTrac short sales (aka pre-foreclosure sales) in the third quarter totalled 98,125, an increase of 22% compared to both the previous quarter and the previous year.

REO sales totalled 94,934 during the third quarter, which is an increase of 19% compared to the previous quarter, and a decline of 20% compared to the previous year.

Totalling it up 193,059 properties at some stage in the foreclosure process were sold during the third quarter, an increase of 21% compared to Q2 and a decline of 3% on the year. At that foreclosure-related sales were responsible for 19% of all residential property sales in the US for Q3, which is the same level as Q3 last year, but down from 20% in the previous quarter.

The average sale price of the short-sales decreased by 3% compared to the Q2 and by 5% compared to Q3 2011, while the average price of REO properties fell 7% on the quarter and 7% on the year. The average discount on a short-sale went from 27% in Q2 to 25% in Q2, while the discount on REO properties grew from 33% to 38% over the quarter. Homes in foreclosure or bank owned sold at an average price that was 32 percent below the average price of a home not in foreclosure, up from a 29 percent discount in the second quarter and a 31 percent discount in the third quarter of 2011. Short-sales of properties not yet in the foreclosure process also saw strong growth in the 3rd quarter, with a 15% q-o-q increase and 17% y-o-y. Such sales accounted for 22% of all residential sales, meaning that distressed sales as a whole accounted for 41% of all sales.

“The shift toward earlier disposition of distressed properties continued in the third quarter as both lenders and at-risk home-owners are realizing that short sales are often a better alternative than foreclosure,” said Daren Blomquist, vice president of RealtyTrac. “However, the scheduled expiration of the Mortgage Forgiveness Debt Relief Act at the end of this year could stifle this trend toward short sales. If that law expires as scheduled, home-owners who agree to a short sale could see their income tax jump significantly because the portion of the unpaid loan balance not covered by the short sale proceeds will be considered taxable income in many cases.”

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