A trend I wrote about for the December 2012 edition of Scotsman Guide on how lenders are shifting toward short sales and away from foreclosure has become even more pronounced since I wrote it back in October.
At that time, based on RealtyTrac data through May of 2012, short sales occurring on properties not in foreclosure accounted for 14 percent of all residential sales, compared to pre-foreclosure sales (often short sales also) accounting for 10 percent of all sales, and bank-owned (REO) sales on foreclosed properties accounting for 11 percent of all sales. Those non-foreclosure short sales increased 18 percent from the same time period in 2011.
Back then the mortgage servicing industry’s stance could be described as favoring short sale over foreclosure. But based on more recent data the stance could be described as anything but foreclosure. Rather than make foreclosure the first alternative for a non-performing loan as was the case historically, foreclosure is the last resort after a slew of other options, most notably short sales.
REO Sales Outnumbered
Data from the RealtyTrac third quarter U.S. Foreclosure Sales Report issued last week shows that the non-foreclosure short sales during that quarter accounted for an estimated 22 percent of all residential sales, while pre-foreclosure sales accounted for 10 percent and REO sales also accounted for 10 percent.
Pre-foreclosure sales actually outnumbered REO sales for the quarter, increasing 22 percent from a year ago while REO sales decreased 20 percent from a year ago. There was a quarterly spike in REO sales, particularly in some states, indicating that REO sales are not dead yet, but the trend continues to be away from REO and toward pre-foreclosure sales and short sales.
That trend is accelerating based on the monthly data within the quarter. In July, there were about 28,000 pre-foreclosure sales, an increase of just 2 percent from July 2011. In August the pre-foreclosure sale total increased to 33,000, up 12 percent from a year ago, and in September there were nearly 37,000 pre-foreclosure sales, up 56 percent from a year ago. Preliminary pre-foreclosure sales numbers in October indicate pre-foreclosure sales will be up somewhere in the neighborhood of 75 percent from a year ago.
Of course that push toward short sales could be stopped short when the tax break for homeowners doing short sales goes away with the expiration of the Mortgage Debt Forgiveness Relief Act at the end of the year. More about that in the CNN clip below.
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Foreclosure Sales Increase 21 Percent in Third Quarter, Short Sales Biggest Share of Distressed Sales
REO Sales Not Dead Yet
$7.6 Billion Available for Millions Facing Foreclosure