Shift From Foreclosures to Short Sales

RealtyTrac is good with figures, and it notes that sales of distressed real estate made up 24% of all single-family residential sales both in the fourth quarter of 2011 and the entire year (up from 20% in Q3). These are homes that were in some stage of foreclosure or lender-owned (REO).

For good news, if there is any, pre-foreclosure sales and sales of REO represented 23% of all sales during the year compared to 25% in 2010. RealtyTrac CEO Brandon Moore said:

Sales of foreclosures in the fourth quarter continued to be slowed by questions surrounding proper foreclosure paperwork and procedures. We continued to see a shift toward pre-foreclosure sales, or short sales, and away from REO sales in the fourth quarter.

Distressed properties typically sold at a 29% discount compared to a sale of a non-foreclosure related property during the quarter.

Homes that sold pre-foreclosure in the fourth quarter had been in the foreclosure process for an average of 308 days compared to an average of 237 days in the fourth quarter of 2010. REOs that sold in the fourth quarter took an average of 175 days to sell after completing the foreclosure process, compared to 171 days in the fourth quarter of 2010.

And how are people buying homes right now?

In a different study, Campbell Surveys and Inside Mortgage Finance jointly released the HousingPulse Tracking Survey that showed more homebuyers are scooping up properties with cash only, even in an environment for record-low mortgage rates. The survey used responses from 2,500 real estate agents.

All cash buying remain important to the market, and is running in the 31-34% range of the homebuyer market for nine months last year.

Not only are money-making alternatives few (“Why should I earn nearly 0% on my money and pay 4% for a mortgage?”) but there are discounts in offering all cash for a house, and as noted above, a certain percentage are distressed sales conducive to all-cash deals. Late appraisals and lengthy loan processing times were also reasons given.