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Sales of bank-owned homes surge

In this file photo, A bank owned sign hangs outside a home for sale in Las Vegas.
Jacob Kepler | Bloomberg | Getty Images
In this file photo, A bank owned sign hangs outside a home for sale in Las Vegas.

The steep jump in home prices this year is benefiting the big banks, pushing them to sell their repossessed properties at a faster pace.

Sales of bank-owned (REO) homes accounted for 10 percent of all residential property sales in November, according to RealtyTrac. That is up from 9.1 percent in October and accounted for the third consecutive month of increases in REO sales.

"Lenders are taking advantage of this environment to unload more of their bank-owned inventory and in-foreclosure inventory at the foreclosure auction," said RealtyTrac's Daren Blomquist in a release.

"But as the backlog of distressed inventory available dries up in many of the markets with the most efficient foreclosure processes—namely California, Arizona and Nevada, with Georgia not far behind—overall sales volume is declining and will continue to do so until more nondistressed sellers enter the market."

(Read more: Mortgage rates to rise, but not because of tapering (yet))

Institutional investors, who drove the distressed sales market over the past few years, dropped off earlier this year, faced with bidding wars in some of the previously hot markets. Now they appear to have revived interest.

Their purchases represented 7.7 percent of all home sales in November, up from 6.3 percent a year ago. This may be because price gains are slowing down, and more inventory is coming on the market.

"We have seen an uptick in REO offerings, which is a little surprising for this time of the year," said Rick Sharga, executive vice president at Auction.com.

Sharga said his company, which auctions off properties online, got 3,000 REOs last week that had never been marketed before. "We are seeing more properties sold at trustee sales, and we are seeing more properties that are coming from servicers priced to sell at trustee sales."

(Read more: Homes get makeovers as more mortgages are back in black)

Previously, mortgage servicers had put foreclosed properties up for sale at the full value of the loan, but those usually went back to the bank, as investors sought a larger discount. Ironically, as prices are rising, servicers are discounting the homes more.

In turn, the share of all-cash sales is rising again. While the Realtors put it at 32 percent of all sales, RealtyTrac, which may get more data on distressed sales, puts the share at 42 percent, the highest level since it began tracking all-cash purchases in January 2011.

(Read more: Mortgage applications plummet amid uncertainty)

In the meantime, Fannie Mae just announced it is giving non-investors more time to look at its bank-owned properties before letting investors compete. Its "First Look" program used to give owner-occupant buyers 15 days to make an offer before investors could bid. That has been extended to 20, possibly reflecting the extended time it is now taking consumers to secure financing. Investors largely use cash.

"The goal has always been to sell to owner-occupants whenever possible," said Fannie Mae spokesman Andrew Wilson.

By CNBC's Diana Olick. Follow her on Twitter @Diana_Olick.

Questions? Comments? facebook.com/DianaOlickCNBC

  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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