RealtyTrac: Auctions Preferred To Short Sales As Home Prices Rise

Due to rising home prices and continuing strong demand from institutional investors, auctions are now more popular than short sales for liquidating bank-owned (REO) or foreclosed properties, according to RealtyTrac.

‘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 sales and bank-owned sales,’ says Daren Blomquist, vice president at RealtyTrac, in a statement. ‘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.’

According to the firm's monthly Foreclosure Sales Report, short sales represented 5.3% of all home sales for October, down from 6.3% in September and down from 11.2% compared to October 2012.

States with the highest percentage of short sales in October included Nevada (14.2%), Florida (13.6%), Maryland (8.2%), Michigan (6.7%) and Illinois (6.2%).

Foreclosure auction sales to third parties – a new category in the report – represented 2.5% of all sales. Although this is down from 2.8% in September, it is nearly twice the 1.3% recorded in October 2012.

Markets with the highest percentage of foreclosure auction sales included Orlando (8.6%); Jacksonville, Fla. (8.6%); Columbia, S.C. (8.1%); Las Vegas (6.6%); Charlotte, N.C. (6.1%); Miami (6.0%); and Tampa, Fla. (5.7%).

Nationwide, REO sales accounted for 9.6% of all sales, up from 8.9% in September and up from 9.4% in October 2012.

States with highest percentage of cash sales included Florida (65.6%), Nevada (55.5%), Georgia (55.4%), South Carolina (53.9%), North Carolina (49.9%), Michigan (49.5%) and Ohio (49.2%).

Institutional investor purchases represented 6.8% of all sales in October – a major drop from a revised 12.1% in September and down from 9.7% a year ago, according to the report.

Markets with the highest percentage of institutional investor purchases included Memphis, Tenn. (25.4%); Atlanta (23.0%); Jacksonville, Fla., (22.2%); Charlotte (14.5%); and Milwaukee (12.0%).

A total of 5,649,965 single-family homes, condominiums and townhouses sold in October – a 2% increase compared to September and up 13% from October 2012, according to the report. Despite this, home sales were down slightly, on a year-over-year basis, in three ‘bellwether’ western states: California (down 15%), Arizona (down 13%), and Nevada (down 5%). October marked the third consecutive month that home sales volume fell in those three states.

The national median sales price of all residential properties – including both distressed and non-distressed sales – was $170,000, unchanged from September but up 6% compared to October 2012.

October marked the 18th consecutive month median home prices have increased on an annualized basis, according to RealtyTrac.

The median price of a distressed residential property – in foreclosure or bank-owned – was $110,000 in October – 41% below the median price of $185,000 for a non-distressed property.

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