Foreclosures and short sales, where homes sell for less than owners owe on their mortgages, accounted for 43% of residential sales last year, according to data released this week by RealtyTrac, a real-estate-data firm. Short-sale purchases increased 4% from a year prior, while sales of homes in pre-foreclosure — that is, in some stage of foreclosure before a home is repossessed — increased 6%.
Fueling these increases are big discounts for the taking. In many markets — including Chicago; Daytona Beach, Fla.; and Santa Barbara, Calif. — buyers were able to purchase distressed properties during the fourth quarter of 2012 at an average discount of 30% to 50% to what they’d pay for a regular, nondistressed home, according to RealtyTrac. In many cases, these discounts are available in markets where real-estate prices as a whole appear to have bottomed out, experts say.
Cheap finds come at a time when many buyers are facing a tightening housing market. Real-estate listings have been dropping, pushing up prices of regular homes in many markets. As a result, listing prices of regular homes have been picking up.
In contrast, with distressed properties, buyers still can save hundreds of thousands of dollars. Working in their favor, in part, is that banks are more willing to unload homes as short sales than in previous years. Some banks are offering homeowners who are behind on mortgage payments cash in exchange for selling the home in a short sale. (Bank of America, for instance, has been offering as much as $30,000 to qualifying homeowners since last year.) That’s led to more short sales selling at a discount. And after years of a growing backlog of foreclosures, more of these listings are hitting the market, says Daren Blomquist, vice president with RealtyTrac, as courts process more of these cases. (Many states require court approval before a home can be repossessed by a bank.)
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