The Real Deal New York

U.S. short sales jump as banks try to clear distressed inventory

August 25, 2011 02:12PM

Sales of homes that were in some stage of foreclosure or bank-owned accounted for 31 percent of all U.S. residential sales in the second quarter of 2011, up from 24 percent of all sales in the second quarter of 2010, according to a market report by RealtyTrac, released today. Pre-foreclosure sales jumped 19 percent from the first quarter.

The average sales price of a foreclosed or bank-owned property was $164,217 in the second quarter of this year, down less than 1 percent from the first quarter and down nearly 5 percent from the second quarter of 2010.

“With average prices on distressed real estate trending down and average discounts trending up, this report is clearly good news for well-positioned buyers and investors looking for bargain real estate that will build them wealth in the long term and often cash flow as rental real estate in the short term,” said James Saccacio, CEO of RealtyTrac.

Perhaps less evident, Saccacio said, is that a jump in pre-foreclosure sales coupled with bigger discounts on pre-foreclosures amounts to good news for distressed homeowners as banks focus on more efficiently clearing distressed inventory through more streamlined short sales.

“This gives distressed homeowners who do not qualify for loan modification or refinancing — or who are not interested in those options and want to sell — a better chance of completing a short sale to avoid foreclosure. Streamlined short sales also give lenders the opportunity to more pre-emptively purge non-performing loans from their portfolios and avoid the long, costly and increasingly messy process of foreclosure and the subsequent sale of an REO,” Saccacio said. – Katherine Clarke

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