Buyer Demand Has Deteriorated to a Nearly Three-Year Low
by Daren Blomquist
Auction.com, the nation’s leading distressed real estate marketplace, released its Q3 2025 Auction Market Dispatch, which shows a continued rise in distressed property supply, particularly at foreclosure auction, even as buyer engagement and pricing behavior softened. The increase in completed foreclosure auctions — up 31% year-over-year — signals a more active pipeline, driven by lower equity levels, and the expiration of foreclosure moratoriums on VA-insured loans. However, buyer caution remains evident, with declining sales rates and subdued bidder activity suggesting ongoing market hesitancy.
“The primary concern is the growing number of houses for sale,” wrote an Arkansas-based Auction.com buyer in response to a buyer sentiment survey in late September. “This creates a buyers’ market; therefore, you can expect to sell a property for less than you would have a year ago.”
Distressed Demand
The foreclosure auction sales rate in Q3 2025 declined 2% quarter-over-quarter and 12% year-over-year, ending the quarter at an 11-quarter low — the lowest since Q4 2022. September marked a 65-month low, with sales rates falling in 73% of major markets analyzed, including:
» Chicago (down 3%)
» Houston (down 35%)
» Dallas–Fort Worth (down 16%)
» Detroit (down 7%)
» Atlanta (down 30%)
“Fewer investors [are] buying foreclosures which makes it easier to purchase,” wrote one survey respondent from Arizona who said market conditions are making him more willing to buy.
Markets bucking the trend included:
» New York City (up 13%)
» Philadelphia (up 12%)
» Pittsburgh (up 16%)
» Orlando (up 22%)
» Baton Rouge (up 7%)
REO auction demand also softened. Bidders per asset dropped 2% quarter-over-quarter and 14% year-over-year to a 23-quarter low — the lowest since Q4 2019. September marked a 90-month low in bidder intensity.
Price Demand
Foreclosure auction buyers were willing to pay an average of 55.7% of estimated after-repair value in Q3 2025, down slightly from 56.5% in Q2 and 56.6% a year ago. Price demand ticked up to 55.9% in September, suggesting a tentative floor.
The after-repair value is the estimated market value of a home in fully repaired condition. Most properties sold at foreclosure and REO auction are in distressed condition with substantial renovations needed to bring them to fully repaired condition.
“Overall expectation that housing prices are falling and will continue to fall,” wrote one survey respondent from Indiana who said he was bidding lower relative to after-repair value at auction due to market conditions in the last 90 days.
Price demand decreased in 51% of major markets, including:
» New York
» Houston
» Dallas
» Detroit
» Atlanta
However, 49% of markets saw increases, including:
» Chicago
» Philadelphia
» Minneapolis–St. Paul
» St. Louis
» New Orleans
REO auction buyers paid an average of 53.6% of after-repair value — down from 55.6% in Q2 and 54.4% a year ago to a 29-quarter low. September saw a modest rebound from an 83-month low of 52.8% in August.
Distressed Supply
Completed foreclosure auctions rose 4% quarter-over-quarter and 31% year-over-year to a 10-quarter high — the highest since Q1 2023. Scheduled foreclosure auctions were down 2% from Q2 but went up 21% annually, reaching 62% of the Q1 2020 benchmark.
Foreclosure auction volume increased across all loan types, led by VA-insured loans (up 504% annually), privately held loans (up 28%), and FHA-insured loans (up 22%).
Foreclosure auction volume increased from a year ago in 38 states, including:
» Texas (up 66%)
» California (up 18%)
» Michigan (up 26%)
» Colorado (up 46%)
» Arizona (up 46%).
REO auction volume rose 1% quarter-over-quarter and 15% year-over-year to a 10-quarter high, reaching 43% of pre-pandemic levels. Vacant REO properties accounted for 54% of REO auction volume — the highest share since Q4 2021.
“Occupied versus vacant properties is a big one for me,” wrote a survey respondent from California. “It’s been extremely hard in the past to evict persons from the property.”
Distressed Pricing
Sellers lowered pricing at both foreclosure and REO auctions in Q3 2025. The average credit bid-to-after-repair value at foreclosure auction fell 105 basis points from Q2 and 88 basis points from a year ago.
Despite this, the bid-ask spread remained flat at 6 percentage points — unchanged from Q2 and Q3 2024 — due to a corresponding decrease in buyer pricing.
“I have bought less houses the last couple of years because prices are so high,” wrote a Michigan-based survey respondent.
At REO auction, seller pricing dropped 108 basis points quarter-over-quarter and 225 basis points year-over-year. This narrowed the bid-ask spread to 12 percentage points from 14 points a year ago, although it widened slightly from 11 points in Q2.
“Purchase price compared to what my assessment shows the ARV (After-Repair Value) to be greatly affects how many properties I buy a year along with interest rates,” wrote a survey respondent from Maryland.
KEY POINTS
» Foreclosure auction volume increased 4% quarter-over-quarter and 31% year-over-year to a 10-quarter high — the highest level since Q1 2023.
» REO auction volume rose 1% from the previous quarter and 15% annually, also reaching a 10-quarter high.
» Vacant REO properties accounted for 54% of REO auction volume — the highest share since Q4 2021.
» Foreclosure auction sales rate fell 2% quarter-over-quarter and 12% year-over-year to an 11-quarter low.
» Buyer price demand at foreclosure auction averaged 55.7% of after-repair value, which went down slightly from 56.5% in Q2 and 56.6% a year ago.
» Bid-ask spread remained flat at foreclosure auction but widened slightly at REO auction despite seller price reductions.
