Even fine homes and luxury homes are the subject of foreclosure and short sales. How the bank holding the not responds to the effort to liquidate will affect the investor’s bottom line. Rarely is a loan note held by the same bank that wrote the loan. Notes are sold, often immediately to an investor and theloan is then serviced by a big bank. So the reality is, investors who hold the notes are becoming more savvy about the best way to extract themselves from a growing loss position.
Banks are more willing to agree to a sale at a lower cost than a home owner’s mortgage balance in order to avoid having the property fall into foreclosure, which can be more costly for a lender.
In the fourth quarter of 2011, there were more than 88,000 short sales, a rise of 15 percent compared to a year prior. In all, short sales made up 10 percent of all home sales sold in the fourth quarter, according to recent data released by RealtyTrac.
On the other hand, bank-owned homes dropped 12 percent year-over-year (to 116,000), making up 13 percent of all home sales during the fourth quarter.
The average short sale in the fourth quarter sold for $184,221, according to RealtyTrac. The average foreclosure, on the other hand, sold for $149,686.
Banks are now more willing to do short sales and 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,” said RealtyTrac CEO Brandon Moore.
Meanwhile, during the fourth quarter, 24 percent of homes sold — nearly one in four — were in some stage of foreclosure, either already bank-owned or already winding through the process, RealtyTrac reports. The number is slightly down compared to a year prior when foreclosures accounted for 26 percent of all home sales, RealtyTrac reports.
However, Moore says he expects foreclosure sales to rise this year, “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.”