Discount For Foreclosed Homes Widened In 2010

LOS ANGELES — The gap between the average sale price of a foreclosed home and that of other properties grew wider last year, giving homebuyers who snapped up bank-owned homes big discounts.

And homebuyers can expect to see more of those bargains this year, because fewer foreclosed homes were sold in 2010 than were taken back by banks, foreclosure listing firm RealtyTrac Inc. said Thursday.

Buyers who purchased a foreclosed home last year got, on average, a 28 percent discount to a non-foreclosure sale. That's up from a 27 percent average discount in 2009, RealtyTrac said.

While only a slight increase, the trend suggests a widening price spread between foreclosure sales and other types of residential properties.

Foreclosed homes made up nearly 26 percent of all home sales last year, according to RealtyTrac. That's down from 29 percent in 2009 but up from 23 percent in 2008.

Traditionally, foreclosures account for less than 10 percent of all home sales.

In all, 831,574 foreclosed properties were sold last year, including those in some stage of foreclosure but not yet taken back by lenders, the firm said.

That's down 31 percent from 2009 and down nearly 14 percent from 2008.

Sales of homes outside of the foreclosure process declined nearly 19 percent in 2010 from the prior year, according to RealtyTrac.

While the pace of foreclosure sales slowed, lenders stepped up their home repossessions, taking back more than 1 million homes last year.

That deepened the so-called shadow inventory of foreclosed homes that have yet to hit the market. Experts contend that the housing market won't fully recover until banks find buyers for those properties.

"We need to clear out the inventory if the market is going to come back," Rick Sharga, a senior vice president at RealtyTrac.

Banks are reluctant to put too many foreclosed homes on the market at once, because they would face booking sizeable losses on the sales.

Generally, about 30 percent of banks' foreclosure inventory is on the market, Sharga said.

More foreclosure sales, however, would almost certainly send overall home values lower in many markets, because foreclosed homes often sell at a sharp discount to other properties.

Already, housing experts predict home prices will slide another 5 percent this year.

"You could have a scenario where housing prices could be pushed lower," Sharga said.

Foreclosure sales, like home sales overall, fell sharply in the last three months of the year. Government tax credits earlier in 2010 helped gin up home sales, but pulled forward transactions that would have typically occurred later in the year.

Lenders' efforts to deal with foreclosure documentation problems and heightened scrutiny in states where courts play a role in the foreclosure process also dampened sales of bank-owned homes.

That slowdown began to ease in December, however, and foreclosure sales spiked 21 percent, the firm said.

Nevada, Arizona and California had the highest percentage of foreclosure sales last year.

Nevada led the nation with foreclosure sales accounting for nearly 57 percent of all home sales, RealtyTrac said. That was down from 67 percent the year before.

Several other states had foreclosure sales that accounted for at least one quarter of all home sales last year: Florida, Michigan, Georgia, Idaho, Oregon, Illinois, Virginia and Colorado.

Comments

[Sundialsvc4]

11:58 AM on 02/25/2011

And do you seriously want to buy a home when you will not receive clear title to it?

The securities laws of the United States are quite clear, even if they are ignored. You must be THE "holder in due course" of a security in order to exercise the rights of the securities-holder. "Here, your honor, is the very piece of paper that he or she signed." If you don't have that, you can't foreclose. If you foreclosed anyway, and it is later determined that you had not the legal right to do so, then the subsequent purchaser has no legal title to what he thought he purchased from you "in good faith," because you did not possess the thing that you conveyed.

And... do you SERIOUSLY want to get yourself caught in that trap? You bought the property, you did everything right, and oh by the way you were defrauded. You have to vacate the land. Good luck getting your money back. Is THAT really what you want?

Or do you do the very sensible thing? You wait. You don't buy a thing, no matter what the price. You wait. For the "too big to fail" banks to start dropping like flies. (When the first one of them is shown to "have no clothes," all nineteen-odd of the others will be gone within a month.) It will be very ugly. But if you bought, you are now "involved," and you are The Little Guy.

[Harpotoo]

01:32 PM on 02/24/2011

They cant give away homes in the Democrat bastion of Detroit!

[POLINUT]

01:14 PM on 02/24/2011

Doesn't sound like discounts to me. Sounds like some dumb buyers bought retail in areas where they could have bought foreclosures. Awesome glass-half-full reporting...

[democrats for life]

11:46 AM on 02/24/2011

yet more good news for the economy. housing prices is always the 1st thing that pulls us out of a recession. if the prices continue to remain flat or go down, construction jobs will remain down too. manufacturing always pulled us out of recessions also, but we outsourced most of those jobs. this could very well end up being a 12 year recession

[Gabe Views]

11:12 AM on 02/24/2011

"We need to clear out the inventory if the market is going to come back," said Rick Sharga, senior v.p. at Realty Trac.

As an information tracker or an agent you must let the market's buyers decide if they are going to put themselves at risk by purchasing any property with a chain of title that has been broken in securitization, or, what do you mean "we?"

[Klarsonent]

11:51 AM on 02/24/2011

You're right. Who would buy a foreclosure today, without doing a "title search" before making an offer. Banks did a sloppy job in following legal procedures with the chain of title on these properties. I'm wondering when they will be held accountable for their actions.

[Sundialsvc4]

12:04 PM on 02/25/2011

Even if you did a title search, Klarsonent, "even if you did every single thing absolutely according to the book," you are still in the position of The Fall Guy. The Sucker. The one who stands to lose what he cannot afford to lose, at the hands of those who do not give a damn.

If a security can be chopped into sawdust and sold to the four winds, then coming up with whatever answer you want on "a title search" is also no big deal.

In business, as you well know, "always think ahead to 'then what?' " So you bought title insurance. So the sawdust hits the fan ;-) and your title is declared illegal. "Then what?" Who'd you buy that "insurance" from, and oh by the way, where's the financial backing of the provider?

You can easily see where I'm going with this. "Oops! They were credit default swaps! And now they're worthless, so, heeheeeheee, guess I can't pay you after all! Buh-bye!!"

(I will omit the Britney Spears reference; much too early in the morning for that.)

So you do the sensible thing: you keep your little bag of gold coins buried right there, somewhere in your great big pasture and only you know where it is, and ... you wait.