Foreclosures a Quarter of Home Sales

RealtyTrac revealed on Thursday that foreclosed homes accounted for approximately a quarter of home sales in 4Q11. According to

, during the fourth quarter of last year, homes that were either bank owned or going through the foreclosure process made up 24% of all home sales, a number which is up 20% from the previous quarter, and down slightly from the same time during the previous year when foreclosures were making up 26% of sales. That means that a total of 204,080 foreclosed properties were purchased in 4Q11, down 2% from the same time during the previous year. The total numbers in 2011 saw foreclosure sales down 2% YoY to 907,138. Those numbers account for 23% of all home sales. Brandon Moore, CEO of RealtyTrac, told CNN that, “Sales of foreclosures in the fourth quarter continued to be slowed by questions surrounding proper foreclosure paperwork and procedures. Even so, foreclosures accounted for nearly one in every four sales during the quarter and for the entire year. We expect to see foreclosure-related sales increase in 2012, particularly pre-foreclosure sales, as lenders start to more aggressively dispose of distressed assets held up by the mortgage servicing gridlock over the past 18 months.” Banks are apparently jumping all over the idea of short sales at present, preferring to use that method to get rid of properties that are in default. With short sales, home-owners who owe more on their property than it is worth sell their home to the bank at the lower market value and the bank takes on the loss. 4Q11 saw 88,000 short sales, which is a 15% rise when compared with the previous year. In addition, short sales made up 10% of all homes sold during the final quarter of last year, while sales of bank-owned homes dropped 12% YoY to 116,000, which makes up 13% of all sales during 4Q11. Moore continues, “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 non-performing loans.” The attraction to short sales comes from the fact that both parties have agreed terms early on so there are far fewer legal wrangles later on. One would imagine that it can be tough dealing with families in the process of losing their homes when no terms have been agreed. Short sales also offer more attractive returns. 4Q11 saw the average short sale bring in $184,221, while the average foreclosed home sold for $149,686. In addition, as if to sweeten the deal further, short sales get completed more quickly, taking an average of 308 days to complete a short sale during the fourth quarter, while foreclosures can take years from the beginning to the end of the oft-painful process. There are no surprises here. In this still-distressed economy, the fact that so many foreclosed homes are being sold will raise few eyebrows. Certainly, there is a level of desensitization surrounding the word after months of hearing it again and again. We no longer see a family losing its home, rather we see numbers. That in itself is a scary thing. It is also no surprise that the banks are choosing the short sale route. It makes sense to choose the road with less obstacles and ultimately more money, even if the bigger story is one of financial loss. As the economy continues to show small signs of recovery, we can only hope that the nation won't have to continue to be so numb to the notion of foreclosure.