RealtyTrac: Preforeclosure Sales Rising, REO Sales Falling

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Residential buyers are gravitating towards purchasing preforeclosed properties rather than bank-owned assets, according to a report from RealtyTrac.

In 2012, the Irvine, Calif.-based analytic provider said preforeclosure sales increased 6% on an annual basis, while REO sales fell 15% during this time period.

Overall, 947,995 U.S. properties in some stage of foreclosure or bank-owned were sold last year. This is 6% less than 2011 and 11% fewer than 2010.  

The total share of distressed residential sales in 2012 was 43%, with foreclosure-related sales representing 21% of the total and short sales of non-foreclosed properties making up 22% of all units sold. 

“Although foreclosure-related sales represent a shrinking share of total sales, primarily because of fewer bank-owned purchases, distressed sales are still a disproportionately high portion of the overall housing market,” said Daren Blomquist, vice president of RealtyTrac.

Third parties purchased approximately 450,000 pre-foreclosure residential housing units—in default or scheduled for auction—last year. This figure is about 4,200 less properties than were sold in 2010, which marked the highest total since RealtyTrac began tracking this sector eight years ago.

Pre-foreclosure sales increased on an annual basis in 28 states and outnumbered REO sales in 12 states. Record highs for preforeclosure sales were set in nine states, including California, Georgia, Illinois, Ohio and Texas.

Meanwhile, 498,122 REO sales occurred in FY2012, down 15% from the previous year. Despite the decrease nationwide, REO sales were up year-over-year in 26 states, such as Illinois (up 19), Pennsylvania (12%), Massachusetts (12%), Texas (11%) and Wisconsin (10).

Lastly, compared to 2011, short sales—where the sales price was below the estimated amount of all outstanding loans for a given property—rose 4% in 2012. Furthermore, short sales accelerated across the country throughout the year, increasing from the previous quarter in each quarter. Nonforeclosure short sales surged in the fourth quarter 17% higher than a year ago and reached a seven-quarter high, RealtyTrac revealed.

On average, short sales for nonforeclosed assets sold short of the loan amount by $81,621, down nearly $6,000 from the prior year.

Through 4Q 2012, residential properties in foreclosure or REO sold for an average price of $171,704, an increase of 2% from the third quarter and up 4% from the prior year.

“While distressed properties are still selling at a significant discount compared to nondistressed properties, average distressed property prices are increasing in many markets thanks to strong demand and limited inventory,” Blomquist added.