Brentwood realty broker Hector Villatoro stands outside a home on...

Brentwood realty broker Hector Villatoro stands outside a home on Washington Avenue. The house is a new listing that's a short sale, in which the lender agrees to take less than owed on mortgage if a buyer is found. (Aug. 24, 2011) Credit: Steve Pfost

Sales of distressed homes dropped on Long Island in the second quarter compared to a year earlier, despite prices that, on average, were about 43 percent lower than those in regular sales, a new report says.

RealtyTrac, which monitors foreclosure data, reports 530 distressed homes -- those in the foreclosure process or already taken over by lenders -- were sold during the period, representing 12.5 percent of all home sales. That's down from 863 such closings in the same quarter last year, or 15 percent of all sales, and down from 659 closings in the previous quarter, or 14.4 percent of sales.

The average closing price of a distressed property was $261,924, data show.

Nationwide, 31 percent of all sales involved distressed properties, Realtytrac said. It was 24 percent a year ago and 36 percent in the first quarter of this year.

RealtyTrac and the Multiple Listing Service of Long Island do not track the number of such homes on the market. But local real estate experts said distressed sales fell in the past year, because there are fewer such homes on the market.

The distressed inventory from the subprime credit boom has cleared out for the most part, said broker Hector Villatoro, founder of Arvy Realty in Brentwood. Also, the flow of bank-owned properties onto the market "dried up" in the past year as lenders try to clear up legal issues over their practices.

At the same time, fewer delinquent borrowers want to put their homes on the market, real estate experts said. They prefer to live there mortgage-free until eviction or they negotiate a break with lenders, they said.

Villatoro estimated that listings of short sales, in which the lender agrees to take less than owed on the mortgage, dropped by about 10 percent from a year ago: "A lot of people -- after they realized banks are taking longer to foreclose on their homes -- don't want to go for short sales. They see no pressure to sell. They can stay longer."

Michael Gallagher, a Hicksville real estate attorney and title closer, sees a growing obstacle to short sales, despite federal incentives to fast-track alternatives to foreclosure. In cases where the borrowers have two loans on the property, the secondary lenders have been demanding a bigger cut of the short sale, he said.

"It used to be the bank in second position would be happy to get $1,000, $5,000," the attorney said. "Now . . . you really have to wrestle with the lender in that position."

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