Homeowners shifted more attention to short sale properties from July through August, a new report by RealtyTrac says.
That may have had a hand in helping to cut down on the flow of foreclosure activity in California.
Data released Thursday, Dec. 6, by the online real estate information reporting service RealtyTrac on the 47,809 distressed sales show that foreclosure-related sales across California fell 11.9 percent from the same quarter in 2011.
Non-foreclosure short sales in California rose 20 percent from July through August over the same period in 2011, and accounted for 14 percent of all sales in the state. Short sale activity from the prior quarter was also up 16 percent.
“The shift toward earlier disposition of distressed properties continued in the third quarter as both lenders and at-risk homeowners are realizing that short sales are often a better alternative than foreclosure,” said RealtyTrac vice president Daren Blomquist.
In Riverside County, the 5,242 foreclosure-related sales averaging $209,284 were down 8.8 percent from the 5,752 distressed property sales recorded from July through August 2011. The foreclosure-related sales rate also dropped 11.1 percent in San Bernardino County over the third quarter, from 4,400 to 3,909. The average sales price there was $180,675.
Blomquist stopped short of calling this a trend.
The volume of homes sold — at an average foreclosure sales price of $267,263 — across California still represents 35 percent of all sales.
In the two-county region, the percentage is slightly less than 50 percent. The scheduled expiration of the Mortgage Forgiveness Debt Relief Act at the end of 2012 could be the spoiler.
If that form of debt relief expires, Blomquist said, short sellers could see their income tax jump. The portion of the unpaid loan balance not covered by the transaction will be considered taxable income in many cases, he said. The average amount on a home classified as a short sale in California was $107,972.
“The prospect of being taxed on potentially tens or hundreds of thousands of dollars in additional income may motivate more distressed homeowners to forgo a short sale and allow the home to be foreclosed,” he said.
“If the mortgage interest deduction is eliminated due to the fiscal cliff quagmire, it would give many underwater and otherwise distressed homeowners one less reason to hang onto their homes.”
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