Sales of bank-owned homes — also known as REOs — decreased nationwide in the first quarter of 2012, but rebounded in some markets where lenders may finally be selling off some of their shadow REO inventory.
The RealtyTrac U.S. Foreclosure Sales Report for the first quarter, released today, shows a total of 123,778 REO sales nationwide in the first quarter, a 15 percent decrease from the first quarter of 2011. This continues a gradual downward trend in sales of bank-owned properties since a peak of 187,622 REO sales in the second quarter of 2009.
The decrease in sales of REO homes was counterbalanced by a 25 percent year-over-year increase in pre-foreclosure sales — typically short sales. This indicates that lenders are turning to short sales as a preferable alternative to foreclosure for an increasing number of distressed loans sitting on their books.
REO Still An Option
That doesn’t mean lenders will altogether abandon foreclosure and subsequent re-sale of foreclosed properties as an appropriate disposition method in some cases where a short sale or other foreclosure alternative — such as loan modification or refinancing — is not considered a viable outcome.
We are already seeing evidence of that in some select markets, where REO sales increased in the first quarter of 2012. The REOs that sold in the first quarter on average were repossessed by lenders about six months earlier, which means that those REO sales represent properties the lenders foreclosed on late last year.
States with the biggest annual increase in REO sales included Minnesota (37 percent), Massachusetts (27 percent), Georgia (19 percent) and Illinois (12 percent).
Among the nation’s 20 largest metropolitan statistical areas, those with the with the biggest annual increases in REO sales were Minneapolis (33 percent), Boston (30 percent), Philadelphia (22 percent), Atlanta (15 percent), and Chicago (13 percent).
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