Home Short Sales Increase as Banks ‘More Realistic’ on Market

U.S. homes nearing foreclosure accounted for 12 percent of total sales in the second quarter as banks agreed to more transactions at prices below the outstanding mortgage balance, RealtyTrac Inc. said.

The proportion of sales of homes in default or scheduled for auction rose from 10 percent a year earlier and was little changed from the first quarter, the Irvine, California-based information company said today in a report. Most of those were short sales, or transactions for less than the mortgage debt, according to RealtyTrac.

An increase in short sales, along with a shorter average time to sell such homes and bigger discounts relative to normal deals, indicate the market is clearing distressed properties more efficiently, Chief Executive Officer James J. Saccacio said in the statement. Total pre-foreclosure deals rose 19 percent from the first quarter, while slipping 12 percent from a year earlier, when a federal tax credit pumped up demand.

“This is a glimmer of hope that lenders are getting more realistic,” Rick Sharga, senior vice president of RealtyTrac, said in a telephone interview. “It’s a win for borrowers who avoid foreclosure, buyers who get a house in better condition and banks that lose less money, which is also a win for taxpayers.”

245 Days

Pre-foreclosure homes took an average of 245 days to sell after receiving the initial foreclosure notice, down from 256 days in the first quarter.

The average sale price was $192,129, a discount of 21 percent relative to non-distressed homes. Discounts averaged 17 percent in the first quarter and 14 percent a year earlier, according to RealtyTrac.

Sales of distressed properties, which also include homes seized by banks, totaled 265,087, down 11 percent from the second quarter of 2010 and up 6 percent from the previous three months.

The average price of all distressed homes sold in the second quarter was $164,217, down less than 1 percent from the previous period and almost 5 percent from a year earlier. Such properties sold at an average 32 percent discount, compared with a 27 percent discount in the first quarter.

RealtyTrac sells default data from more than 2,200 counties representing 90 percent of the U.S. population.

To contact the reporter on this story: Dan Levy in San Francisco at dlevy13@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net