REO and Foreclosure Sales Rise as Short Sales Fall

After a surge in short sales in late 2011 and early 2012, the favored disposition method for distressed properties is shifting back toward the more traditional foreclosure auction and bank-owned sales.

During October, short sales represented 5.3% of the more than 5.6 million annualized pace of residential sales, according to data from RealtyTrac. This is a 6.3% decline from the previous month and an 11.2% drop from a year ago. The states that had the highest percentage of short sales during October were Nevada (14.2%), Florida (13.6%), Maryland (8.2%), Michigan (6.7%), and Illinois (6.2%).
Meanwhile, foreclosure auction sales to third-parties accounted for 2.5% of all sales, which is nearly double the amount from last October.
REO sales, which were 9.6% of the overall total, increased on a monthly and yearly basis too, from 8.9% and 9.4%, respectively. Markets where bank-owned sales represented at least 20% of its single-family homes, condominiums and townhomes sold include Stockton, Calif., Las Vegas, Cleveland and Riverside, Calif.
“The combination of rapidly rising home prices—along with strong demand from institutional investors and other cash buyers able to buy at the public foreclosure auction or an as-is REO home—means short sales are becoming less favorable for lenders,” said Daren Blomquist, vice president at RealtyTrac.
In October 2012, only 33.9% of all residential sales were cash sales. But this October, they represent 44.2% of the monthly sales, with Florida, Nevada, Georgia, South Carolina, North Carolina, Michigan, Illinois and Ohio all having a higher percentage than the national average.
However, institutional investor purchases are down dramatically in October to 6.8% from 12.1% the prior month and 9.7% a year ago.
The national median sales price of all residential properties was $170,000 in October, RealtyTrac says, up 6% from a year earlier. Meanwhile, a foreclosure or REO housing unit sold for a median price of $110,000