NEW YORK—Foreclosure sales in New York dropped by 18.6 percent in 2012, down from 2011, and by 42 percent, down from 2010, according to a year-end report by RealtyTrac, a website featuring foreclosure properties. Meanwhile, the average price of a foreclosed property increased by 9.4 percent year over year.
The report found that New York was the fourth state nationwide in the average amount shorted in non-foreclosure short sales. In a non-foreclosure short sale, a bank approves the sale of a property before the foreclosure proceedings initiate. The property is then sold for less than the mortgage value. In New York, the average short sale amount is $111,754. Short sales accounted for 13 percent of total residential sales in New York in 2012.
Banks may be motivated to process short sales in order to meet the requirements of the National Mortgage Settlement. The loss between the mortgage total and the short sale price is shouldered by the bank and can count towards its total settlement commitment, according to an executive summary of the National Mortgage Settlement.
“The loss that they realize on the sale is what they are counting in the National Mortgage Settlement as basically mortgage relief for the homeowner. If the sale price is $100,000 and the homeowner owes $150,000, they are counting that as $50,000 in relief for the homeowner,” said Daren Blomquist, vice president of RealtyTrac.
The percentage of foreclosure sales compared to total residential sales nationwide has been declining steadily since 2009. Currently, foreclosure sales account for 21 percent of all U.S. residential sales, lower than 2009 levels, but still nowhere near those in 2005 and 2006, when foreclosures accounted for less than 5 percent of total sales.
“I think the percentage of foreclosure sales will continue to decrease steadily in 2013 and 2014. It’s going to take some time. It’s not going to be immediate that that number comes down to 2005 and 2006 levels. But it will gradually decrease over the next several years as those foreclosures are released onto the market,” said Blomquist.