This could never happen in San Diego. You know how absolutely everybody wants to live there and all the rich Asians will buy up all these bargain priced properties that will hit the market as more people foreclose. (sarcasm off)

From the L.A. Times:
The relatively new foreclosure auction tracking service ForeclosureRadar reports that banks and lenders are starting to offer discounts on foreclosed homes at the initial auctions, with discounts running as high as 42% of what is owed on the house.

A refresher course: Foreclosed homes usually don’t “sell” at the initial auction on the courthouse steps — the opening bid is generally the amount of the foreclosed loan, which is generally more money than the home is worth; what usually happens is no one bids and the bank or lender is stuck with the home and then hires an agent to sell it. ForeclosureRadar is reporting that banks and lenders are now offering discounts at those courthouse steps auctions, and in many cases are still not finding buyers.

“Lenders are clearly becoming anxious to avoid taking on more real estate owned (REO) assets,” ForeclosureRadar founder Sean O’Toole said in a press release. O’Toole called the discounting trend a “sea change” in the banks’ pricing strategy.

“We were surprised by the magnitude of the discount and even more surprised that most of the homes went back to the bank with no investor bidding in spite of the price cut,” he said.

Example: A Stockton home with an underlying foreclosed loan of $419,000 was recently auctioned with an opening bid of $240,000 — a discount of 42.8% from the bank’s investment — and still attracted no bids, O’Toole says.

He says the percentage of foreclosed homes now being discounted at auction is 66%, and the average lender discount is $48,000 — up from $9,000 at the beginning of the year.