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Foreclosures made up a smaller slice of all U.S. homes sold in last year's third quarter, as banks delayed placing properties for sale and home sales slowed.

Despite the decline, foreclosures still represented 20 percent of all homes sold in the July-September period -- about four times more than at the height of the housing boom, foreclosure listing firm RealtyTrac Inc. said Thursday.

Foreclosure sales include homes purchased after they received a notice of default or were repossessed by lenders.

In 2005 and 2006, when housing was still flying high, foreclosures made up less than 5 percent of all home sales, the firm said. They peaked in 2009 at 37.4 percent.

As a portion of all homes purchased, foreclosure sales declined in the third quarter from 22 percent in the April-June period. They were down from 30 percent in the third quarter of 2010, RealtyTrac said.

Sales of all previously occupied homes rose in August, but fell in July and September, according to the National Association of Realtors. Sales of new homes, which account for less than 10 percent of the housing market, fell in July and August, but rose in September.

Robo-Signing's Shadow

Ongoing disputes over how some lenders handled foreclosures have been a key factor in foreclosed homes' declining share of all home sales.

In the fall of 2010, some banks and mortgage servicers were found to have been signing off on home foreclosures without first verifying documents, a practice dubbed "robo-signing." That sparked a state and federal probe and prompted many lenders to revisit their foreclosure procedures. Many also delayed taking action against homeowners behind on their mortgage payments.

The delays coupled with uncertainty over the outcome of negotiations to settle the banking-industry probe have led to fewer foreclosed homes being put up for sale.

But housing industry experts say they anticipate that will change swiftly once the investigations are resolved. They note the glut of bank-owned homes and others already in some stage of foreclosure.

"As the foreclosure industry gets clarity on the foreclosure process, they will be able to push more of these foreclosures to sale," said Daren Blomquist, a vice president at RealtyTrac.

As of Dec. 31, there were more than 680,000 U.S. homes owned by banks and another 715,000 in some stage of foreclosure, Blomquist said.

All told, 221,536 bank-owned homes and others in the foreclosure process were sold in 2011's third quarter. That's down 11 percent from the second quarter and down 5 percent from the third quarter of 2010.

Foreclosures, often in need of repair, typically sell at big discounts and weaken prices for neighboring homes.

The Foreclosure Discount

Homebuyers who purchased a foreclosure in the third quarter paid an average of $165,322, representing a discount of 34 percent from the average sale price of all other homes, RealtyTrac said.

The discount was unchanged from the April-June quarter, but declined from 37 percent in the third quarter of 2010.

Bank-owned homes, which are sold after being repossessed, accounted for nearly 12 percent of all sales in the third quarter. Sales of homes in the foreclosure process -- properties in default or scheduled for auction -- made up about 9 percent of all sales.

Nevada led all states with foreclosure sales accounting for nearly 57 percent of all home sales, RealtyTrac said.

Several other states had foreclosure sales that made up at least 20 percent of all homes purchased in the third quarter: California, Arizona, Georgia, Colorado and Michigan.
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