One in four homes sold in Q1 were distressed properties


New data from RealtyTrac shows falling prices and increasing frequency of sales of distressed properties, with improving process times for aggressively priced short sales.

Short sales and foreclosures

According to RealtyTrac, one in four homes sold in the first quarter of 2012 were distressed properties, reaching 26 percent of all sales, up from 22 percent the previous quarter. RealtyTrac data also reveals that foreclosure homes sold for an average of $161,214, a 27 percent discount compared to non-distressed homes sold. Short sale homes accounted for 12 percent of all homes sold in the first quarter, for an average price of $175,461, the lowest level since RealtyTrac began tracking foreclosures seven years ago.

“Foreclosure-related sales picked up in the first quarter, particularly pre-foreclosure sales where a distressed homeowner is selling to avoid foreclosure — typically via short sale,” said Brandon Moore, chief executive officer of RealtyTrac. “Those pre-foreclosure sales hit a three-year high in the first quarter even as the average pre-foreclosure sales price dropped to a record low for our report.”

Moore continued, “Meanwhile the average price of a bank-owned home is stabilizing and even increasing in some areas where a slowdown in REO activity over the past year has resulted in a restricted supply of REO homes available. Still, REO sales did increase on a quarterly basis in 21 states, indicating that lenders are still working through a bottleneck of unsold REO inventory in many areas.”

Processing times, regional performance

During the first quarter, it took an average of 306 days to complete a short sale, and 370 days to process a foreclosure. “Lenders are approving more aggressively priced short sales, which in turn is resulting in more successful short sale transactions,” Moore said.

As short sales and foreclosure sales rose in the first quarters, REOs fell 15 percent over the year, accounting for only 14 percent of all sales during the period.

Nevada, where housing bubbled during the boom and sank during the bust, had more distressed property sales than any other state, followed by California and Georgia, RealtyTrac said.

Among the nation’s 20 largest metropolitan statistical areas, those with the biggest annual increases in pre-foreclosure sales were Atlanta (78 percent), Detroit (75 percent), San Antonio (74 percent), Sacramento (70 percent), and Dallas (69 percent).

Metro areas 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).

via: Tara Steele

Short Sales Map: Percentage Of Sales



How to Rebuild Your Credit After a Foreclosure or Short Sale

If you’re one of the millions of Americans who experienced either a foreclosure or short sales due the housing downturn, you might be left wondering where to go from here, when it comes to rebuilding your credit score.

Here is the information you must know about your credit, to best recover from a foreclosure or short sale.

Know How Things Ended

Though you may be relieved to have finally resolved your housing situation, don’t put it out of your mind just yet. Keith Gumbinger, mortgage expert says that knowing the final terms of the arrangement made with your lender plays a role in rebuilding credit. That’s because different defaulted home loan terms come with different ramifications to your credit score. Know whether you had a short sale (the lender allows you to sell the house for less than the balance on the mortgage, and may or may not require you to make up the deficiency), an involuntary foreclosure (you stopped making payments and the property, and potentially your assets, were seized), or you negotiated a deed-in-lieu of foreclosure (a voluntary process in which you “hand over” the deed to the lender, shortening the process and accompanying expenses), as well as the specific terms were agreed upon. When it comes to foreclosures and short sales, no two agreements are alike; the terms and conditions have different impacts on credit scores, how they are reported to the credit bureaus, and how long they take to “fall off.”

Confirm Where You Are Now

While short sales are often perceived as more “favorable” when it comes to defaulting on a home loan, FICO conducted a study simulating the aftermath of a foreclosure and a short sale, and revealed that in regards to credit score impact, there isn’t much difference between the two events. The real gauge, it seems, is in the starting credit score before the default took place.

FICO examined three hypothetical consumers with starting credit scores of 680 (customer A) 720 (customer B), and 780 (customer C). It found that despite whether the loan default was a short sale or foreclosure, customer C’s credit score was most impacted, indicating that the higher the credit score, the longer it takes to restore. Further, time is critical in rebuilding credit worthiness: a short sale with no deficiency balance will generally require at least three years before the credit score will increase. In the case of a foreclosure, the borrower must wait for at least seven years, and in some cases, up to ten, if a bankruptcy filing was involved.

Keep Credit Cards Under Control

After you have completed the foreclosure or short sale, request your credit report, which allows you one free credit report each year. Confirm that the report does not contain any errors, or reflect old debts that were paid off, and report any disputes to Experian, TransUnion and Equifax immediately. Ornella Grosz, author of Moneylicious: A Financial Clue For Generation Y says that one way to add points to your credit score is by paying off or lowering your existing credit card balances, and that  “about 30 percent of your credit score is made up from keeping balances low. The lower your debt-to-income ratio, the better.” John Ulzheimer, Mint’s credit columnist, also addresses this the post What Kind of Debt Pay-Off Boosts Your Fico Score Most.

Set up automatic bill pay on all of your existing credit accounts to make certain that creditors are always paid on or before the due date (don’t play with grace periods when you’re trying to rebuild credit). Or use the “Bill Reminders” feature on your account. If you have missed payments in the past, commit to starting good habits now. You can rebuild a score by paying every bill on time. On the contrary, skipped or late payments will reduce your credit score further.  Don’t attempt to raise your credit score by closing open credit lines, and know that removing the credit availability might actually hurt your score more after a short-sale or foreclosure, when access to new credit will be limited. (To potential lenders, closing the credit, even it you haven’t used it in years, makes it appear as though you are closer to being “maxed out” than you really are).

If you are left with no credit lines after the foreclosure or short sale and cannot find unsecured lines of credit, apply for a secured credit card, which are offered by many financial institutions and credit unions. Secured cards will require you to deposit funds with the creditor, in exchange for a credit card with a credit line of the same amount. (For example, if you put $500 down, that will be the amount of your secured credit line). If you use secured cards responsibly, they will help to slowly increase your credit score. Over time, the lender may raise your line of credit for “good behavior,” and eventually, you’ll be a candidate for unsecured credit again. However, Grosz cautions to read the fine print in the agreement for all secured cards, and confirm that you will not be charged additional fees for use.

Be Patient

Rebuilding credit after a short sale or foreclosure can be frustrating, but it is a process most impacted by being patient. Amber Stubbs, senior managing editor at says “the more time passes, the less a black mark affects your credit, and you won’t be able to make a full recovery until the derogatory item is off your credit report. Most derogatory items, including foreclosures, fall off seven years after the last activity on the account. If you manage other accounts responsibly while you wait, you should be in good shape by the time the foreclosure disappears from your credit report.”

Stephanie Taylor Christensen is a former financial services marketer based in Columbus, OH. The founder of Wellness On Less, she also writes on small business, consumer interest, wellness, career and personal finance topics.

What Do People Think About Walking Away From a Mortgage?

If you have already formed an opinion about whether it’s OK to ditch a mortgage or not, you’re not alone in being opinionated. Everyone has an opinion on this, from renters to homeowners and from the young to the old. In total, 25 percent of renters think it’s okay to walk away from a mortgage. Homeowners aren’t as hip to ditching, though. Among those who own homes, only 17 percent think it’s OK to stop paying.

Is It a Moral Issue?

Some homeowners believe that whether or not to pay is a moral issue. Their own ethics come into play, telling them that someone who signed a contract should see it through, regardless of how home prices have fallen. The mortgage industry loves that—they are really playing up the idea that paying is a moral obligation.

What people believe about this issue often comes down to their age and gender. To see what age groups and genders believe it’s OK to walk away, click on the graphic. Men and women aren’t as far apart on this issue as you may think. Many people of both genders believe that if your financial circumstances are dire, it may be OK to ditch that mortgage. Do you agree with your peers? Click on the graphic to see.


If you or someone you know would like a professional consultation in regards to a short sale or mortgage concerns. Please let me know.