Black Knight: REO Sales Still About Double What They Were Pre-Crisis

Mortgage Orb - Posted by Patrick Barnard on September 08, 2016

If sales of real estate owned (REO) properties are any indication, it appears that the number of completed foreclosures is “stuck” at about double the rate seen pre-crisis.

Black Knight Financial Services’ most recent Mortgage Monitor report shows that distressed sale activity (REO and short sales) accounted for about 7% of all residential transactions in the second quarter – and although this is the lowest such share in nine years, it is more than twice the “normal” market level of just over 3% seen pre-2007.

The majority of distressed sales taking place in the market today – roughly two-thirds – are REO sales, according to the report.

Interestingly, the discount purchasers got on short sales decreased to a national average of 21%, while the discount purchasers got on REOs increased slightly to 27%.

The trend toward deepening REO discounts is likely due to the geographic shift in transactions from areas where discounts are lower – such as Florida, with an average REO discount of 23% – to areas where they are steeper.

The largest REO discounts over the first six months of 2016 were in the Northeast and Rust Belt states.

Ohio led the nation with a 44% average discount on an REO over a traditional sale, followed by New Hampshire and New York with 41% discounts.

The smallest REO discounts were found in the Southwest, with Texas (14%) and Nevada (16%) seeing the lowest of all.