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Bank reo properties sell for between 25 and 30 percent discount

  • Distressed properties continue to account for one third of property sales
  • Bank reo properties represent the best bargains
  • The greatest discounts are in Ohio, Illinois and Kentucky

As the results for the first quarter of 2010 finally become comprehensively available, it has become evident that one third of all American properties sold during that period continued to be in some or other kind of financial stress, and that the median discount the buyers obtained was approximately 27%.

The number of distressed properties sold during the three months of 2010 totaled almost 233,000, and the median price was just over $170,000. Total distressed property sales were down 14% from the previous quarter, and 33% from the most recent peak. Analysts expect that the median discount will hover between 25% and 30% if banks do not flood the market with further inventory. In the meantime, foreclosures continue stacking up at a faster rate than they are being sold.

The discount rate of 27% is based on the median price of un-distressed properties sold during the same period. This is at best a crude calculation, but at worst a useful indicator.

Recent months continue to log record foreclosure rates as banks step up the ante to clear their backlogs and achieve cash flow. They are currently hovering at around 40% year-on-year and more records seem likely to be broken. There were over 1.2 million distressed property sales during 2009, up 25% from the previous year, and four times the volume experienced in 2007. The percentages of all sales were 29%, 23% and 6% respectively, and the median discounts 25%, 22% and 26%. In a “normal” market, foreclosures should account for no more than 2% of sales.

Compared to these national figures, bank-owned reo sales (which were 19% of all sales during the first quarter of 2010) went for a median 34% discount, again when compared to un-distressed property sales. The proportion was lower in the previous quarter at 16%, but down from 21% year-on-year.

The above produces a fascinating dynamic. Currently the best bargains are in bank reo properties, followed by short sales, with un-distressed properties a distant third. If more short sales take place, the demand and supply paradigm should shift, the banks should get better prices for their inventory, and the national discount rate should come down. In a sense, short sales are currently on the critical path towards recovery.

Median data indicates that Nevada has the highest rate of troubled property sales of any State, at 64%. California has the second highest with 51%, with Arizona a further percentage point behind. Distressed property discounts were highest in Ohio, Illinois and Kentucky where they sold for an average of 39% below par.

Are you looking for a bank reo home for sale in Ohio, Illinois in Kentucky? You will find lists of foreclosed homes at

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