Distressed sales accounted for nearly a quarter of all U.S. home sales in the last three months of 2011, with an increasing share made up of short sales, according to a report from foreclosure data firm RealtyTrac released today.

Sales of homes in some stage of foreclosure or bank-owned made up 23.7 percent of sales overall last quarter, down from 26.4 percent in fourth-quarter 2010, though up from 20.4 percent in third-quarter 2011.

Distressed homes sold for an average $164,944 in the fourth quarter, down 4.7 percent from fourth-quarter 2010. On average, foreclosure-related properties sold for 29.4 percent less than nonforeclosure properties during the quarter, compared to a nearly 35 percent discount in fourth-quarter 2010.

RealtyTrac notes that it does not control for home size or condition when calculating foreclosure discounts.

A total of 204,080 properties sold in the fourth quarter were distressed, down 1.7 percent on an annual basis.

In 2011 as a whole, foreclosure sales fell 2.2 percent from 2010, to 907,138 properties, and made up 23 percent of all sales during the year. Distressed properties sold for an average $164,349 in 2011, down 4.5 percent from 2010, with an average discount of 32.6 percent — essentially flat from the year before.

In the fall of 2010, a controversy concerning the "robo-signing" of foreclosure documents by mortgage servicers erupted, leading to a decline in foreclosure processing. Earlier this month, more than 40 state attorneys general and five major banks — Bank of America, JP Morgan Chase, Citibank, Wells Fargo, and Ally Financial — reached a $25 billion settlement over the issue.

In a statement, Brandon Moore, RealtyTrac’s CEO, said "questions surrounding proper foreclosure paperwork and procedures" continued to slow last quarter’s foreclosure sales.

"We expect to see foreclosure-related sales increase in 2012 — particularly preforeclosure sales — as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock over the past 18 months," Moore said.

Preforeclosure sales — homes in default or scheduled for auction, often sold via short sale — numbered 88,303 last quarter, up 15 percent from fourth-quarter 2010 and accounting for 10 percent of home sales overall. Buyers paid an average $184,221 for preforeclosures last quarter, down 11.3 percent year over year.

Such homes garnered an average 21.1 percent discount compared to nonforeclosure sales and took 308 days, on average, to sell — up from 237 days in fourth-quarter 2010.

Several states saw preforeclosure sales jump by more than 20 percent in the last three months of 2011, including Michigan (103 percent), Georgia (59 percent), Arizona (48 percent), Washington (36 percent), Nevada (29 percent), Oregon (27 percent), Illinois (26 percent), Ohio (25 percent), California (23 percent), and Texas (22 percent).

Sales of real estate owned homes (REOs) fell 11.5 percent year over year in fourth-quarter 2011, to 115,777, and made up 13 percent of all home sales that quarter.

"We continued to see a shift toward preforeclosure sales, or short sales, and away from REO sales in the fourth quarter," Moore said.

"Preforeclosure sales outnumbered REO sales in several bellwether markets, including Los Angeles, Miami and Phoenix, where REO sales had outnumbered preforeclosure sales a year ago. That trend will likely show up in more local markets in 2012 as lenders recognize short sales as a better option for many of their nonperforming loans."

Nevertheless, some states saw REO sales jump 20 percent or more, including Minnesota (65 percent), Wisconsin (23 percent), Washington (21 percent) and Illinois (20 percent).

The average sales price of an REO decreased slightly in the fourth quarter, falling 1.8 percent to $149,686. REOs sold for an average discount of nearly 36 percent last quarter. REOs sold an average of 175 days after completing the foreclosure process, about the same number of days as in the last three months of 2010.

Nevada topped the list of states with the highest rate of foreclosure sales, and more than half of the homes sold in that state were distressed properties.

10 states with highest rate of foreclosure sales

State % of all sales Avg. sales price Avg. % discount
Nevada 56.2 $116,634 22
California 42.9 $234,078 37.8
Arizona 37.8 $123,478 23.3
Georgia 39.2 $106,885 39.6
Colorado 26.2 $177,602 28.8
Michigan 32.7 $78,603 30.1
Florida 20.3 $112,282 26.7
Rhode Island 19.3 $126,490 45.7
Idaho 19.9 $109,256 18.5
Illinois 26.1 $128,790 40.2

Source: RealtyTrac.

Metro areas in the Midwest accounted for half of the 10 metros with the highest discounts on REOs nationwide.

10 metros with highest discounts on REOs

Metro area* % of all sales Avg. REO sales price Avg. % REO discount
Milwaukee-Waukesha-West Allis, Wis. 15 $77,592 57.9
Philadelphia-Camden-Wilmington, Pa.-N.J.-Del.-Md. 7 $109,878 52.5
Boston-Cambridge-Quincy, Mass.-N.H. 9.6 $181,149 50.9
Chicago-Naperville-Joliet, Ill.-Ind.-Wis. 18.7 $118,278 49.7
Atlanta-Sandy Springs-Marietta, Ga. 26.8 $95,321 48.1
Des Moines-West Des Moines, Iowa 20.5 $88,393 46.4
Cincinnati-Middletown, Ohio-Ky.-Ind. 12.2 $81,065 42.4
Seattle-Tacoma-Bellevue, Wash. 18.9 $193,993 40.3
Nashville-Davidson–Murfreesboro–Franklin, Tenn. 12.8 $124,384 38.7
Minneapolis-St. Paul-Bloomington, Minn.-Wis. 17.4 $139,642 31

*Note: Only includes metro areas with at least 500 REO sales during the fourth quarter and where REO sales increased at least 5 percent year over year.

Source: RealtyTrac

Metro areas in the West, particularly California, accounted for six out of 10 metro areas with the highest discounts on pre-foreclosure properties in the fourth quarter.

10 metros with highest preforeclosure discounts 

Metro area* % of all sales Avg. preforeclosure sales price Avg. preforeclosure % discount
San Francisco-Oakland-Fremont, Calif. 19.2 $330,733 41
San Jose-Sunnyvale-Santa Clara, Calif. 18.6 $389,413 37.3
Chicago-Naperville-Joliet, Ill.-Ind.-Wis. 9.1 $156,349 33.5
Atlanta-Sandy Springs-Marietta, Ga. 14.0 $123,271 32.9
St. Louis, Mo.-Ill. 5.7 $96,131 29.6
Jacksonville, Fla. 12.4 $116,447 28.8
Los Angeles-Long Beach-Santa Ana, Calif. 22 $342,668 28
Portland-Vancouver-Beaverton, Ore.-Wash. 8.2 $190,042 26.1
Phoenix-Mesa-Scottsdale, Ariz. 20.3 $122,212 24.7
Seattle-Tacoma-Bellevue, Wash. 7.1 $245,403 24.5

*Note: Only includes metro areas with at least 500 preforeclosure sales during the fourth quarter and where preforeclosure sales increased at least 5 percent year over year.

Source: RealtyTrac.

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