NEW YORK - June 30, 2010 - Homes in the foreclosure process sold at an average 27% discount in the first quarter as almost a third of all U.S. transactions involved properties in some stage of mortgage distress, according to RealtyTrac, Inc.

A total of 232,959 homes sold in the period had received a default or auction notice or were seized by banks, RealtyTrac said in a report today. That’s down 14% from the fourth quarter and 33% from the peak a year earlier, the company said. The average price of a distressed property was $171,971, according to the Irvine, Kalifornia-based data seller.

“The discount will probably stay between 25% and 30% as lenders carefully manage the number of new foreclosure actions in order to avoid flooding the market,”Rick Sharga, RealtyTrac’s senior vice president for marketing, said in an interview.

“We’re clearly creating more properties that will be sold at distressed prices than the market is absorbing,” Sharga said. There were more than 250,000 new bank seizures in the first quarter.

The discount reflects the average sales price of homes in the foreclosure process compared with the average sales price of properties not in distress. About 31% of all U.S. sales in the quarter were of homes in some stage of foreclosure, RealtyTrac said.

Home foreclosures set a record for the second straight month in May, with increases in every state, as lenders stepped up property seizures, RealtyTrac said earlier this month. Bank repossessions climbed 44% from a year earlier and will probably set a record in the second quarter, the company said.

Distressed sales totaled more than 1.2 million last year, a 25% increase from 2008 and a more than four-fold rise from 2007, according to RealtyTrac.

Such transactions accounted for 29% of all sales last year, up from 23% in 2008 and 6% in 2007. The average foreclosure discount was 25% in 2009, 22% in 2008 and 26% in 2007.

A “normal” market would show foreclosures accounting for less than 2% of sales, Sharga said.

Bank-owned properties sold for an average 34% discount in the first quarter, up from 32% both in the previous quarter and a year earlier. Such properties accounted for 19% of all U.S. home sales, up from almost 16% in the fourth quarter and down from 21% in the first quarter of 2009, RealtyTrac data show.

Properties in default or scheduled for auction sold for an average discount of almost 15%, up from almost 14% in the previous quarter and down from 16% a year earlier. These homes are often sold in short sales, where lenders accept less than the outstanding loan amount for the property, RealtyTrac said. Sales of properties either in default or headed for auction accounted for 12% of all sales.

The average price was $154,740 for bank-owned properties and $199,950 for homes in default or scheduled for auction, RealtyTrac said.

“The competing forces will be bank-owned properties and short sales,” Sharga said. “The more short sales, the lower the average discount is likely to be.”

Nevada had the highest proportion of distressed sales of any U.S. state, with 64% of all transactions involving properties in mortgage distress.

Kalifornia ranked second, with such sales accounting for 51% of all sales and Arizona was third at 50%.

Discounts on distressed homes were highest in Ohio, Kentucky and Illinois, where they sold for an average of at least 39% less than non-foreclosures.

RealtyTrac sells default data from more than 2,200 counties representing 90% of the U.S. population.