Posted on Wednesday, December 1, 2010
The ongoing controversy surrounding deficiencies in foreclosure documentation is taking its toll on the housing market as a significant share of home shoppers refused to even look at distressed properties in October, according to an industry study conducted by Campbell Surveys.
In addition, both the share of home purchases involving distressed properties and average prices for foreclosed properties fell last month in the company’s survey of real estate market conditions.
News reports that major servicers were pulling REO properties off the market, including some already under contract, clearly spooked would-be homebuyers, Campbell Surveys found.
The company’s closely-watched monthly survey found that 14 percent of owner-occupant homebuyers and 6 percent of investors refused to view foreclosed properties in October. This buyer fear was even worse for short sale properties, where 30 percent of owner-occupant shoppers and 20 percent of investors refused to consider short-sale homes.
Servicing problems disrupted both short sales and REO sales last month. Survey results show that 24 percent of closings scheduled for October were delayed or canceled due to issues with short sales, while 12 percent were delayed or canceled due to REO title issues.
Although distressed properties have dominated home sales for much of this year, recent foreclosure problems helped trigger a noticeable dip in their share of the market last month. In October, distressed properties accounted for 44.3 percent of transactions tracked by Campbell Surveys – down from 47.5 percent in September.
Not surprisingly, the drop in overall distressed property sales activity helped produce a decline in average prices for short sales, move-in ready REO, and damaged REO in October. At the same time, average prices for non-distressed properties rose.
“With the foreclosure ‘fraud’ issue still out there, buyers are skeptical to purchase a REO,” reported one Florida real estate agent responding to the latest survey. “Until the fraud mess gets cleared up, most of our clients are second guessing their interest in REO properties.”
An agent located in Michigan commented, “Since short sales are more than likely to fail before closure, I completely discourage buyers from wasting their time or mine if they need to buy a home. There is no telling how many good deals or properties the buyer could miss while waiting for any type of answer (even a ‘no’ takes up to 12 months).”
Campbell Surveys’ monthly study of home sales and real estate market conditions is based on responses from more than 3,000 real estate agents nationwide.By: Carrie Bay