One of several houses on Mitchell Street, between Broad and Elmwood, that has been foreclosed.

The Providence Journal / Mary Murphy

When reporting the sale of a residential property through the Statewide Multiple Listing Service, real estate agents are now required to indicate whether it was a distress sale –– a foreclosed property or a short sale situation.

This helps the Rhode Island Association of Realtors track not only how many sales involve distressed properties, but to compare the median sales prices of distressed and nondistressed houses, condominiums and multifamily properties.

This change was instituted in February, and short sales were added to the reporting requirement in May. (Short sales are not foreclosures, but they are often deeply discounted because owners are selling at prices below the outstanding mortgage.)

Agents had always had the option of reporting sales as distressed, but by making the reporting mandatory, it makes the data collection uniform and reliable, according to Donna McGinn, administrator of the Statewide MLS.

“It was a request from our members,” McGinn said. “… .Not just to track median price [of distressed properties], but to track the numbers … We just wanted to see the numbers.”

In June, close to 20 percent of the 716 single-family houses sold in Rhode Island —143, were bank-owned foreclosures. Additionally, 24 of the June transactions were short sales –– bringing the total percentage of distress sales in June to 23.32 percent of the single-family market. In July, 26.3 percent of the single-family sales were distressed, according to the association.

In addition to tracking trends, distress sales reporting can be useful to individuals. Rob Scaralia, president of the Rhode Island Association of Realtors, said knowing if a specific transaction was a distress sale would be helpful to agents and clients looking at comparable sales, known in industry lingo as “comps.”

When deciding how to price a property for sale, or making an offer to purchase real estate, sellers and buyers often look at recent sales of in the same neighborhood, usually houses of similar age, style, size and condition, to help determine market value.

Tracking sales of distressed properties has been especially helpful in understanding this year’s stunning median-price plunge in the multifamily market. In the second quarter of this year, the number of multifamily sales increased to 407, from 240 last year, but the median price plummeted, from $265,000 to $150,000. Close to 61 percent of the multifamily sales were bank-owned foreclosures.

In July, 70.3 percent of the multifamily sales in Rhode Island were distressed, and the median price dropped even further, to $140,000. The number of multifamily sales in July was up 28.7 percent compared to July of last year.

Drastic price cuts on bank-owned foreclosures are luring investors back into the market, said Michael Salvadore Jr., whose company, Salvadore Auctions & Appraisals Inc., of Warwick, has sold a number of foreclosed properties at auction.

Up to 27 foreclosed Rhode Island properties, including many multifamilies, will be auctioned Sept. 16 in Providence by Salvadore in partnership with Texas-based auction house Hudson & Marshall.

The auction will take place at 7 p.m. at the Providence Marriott Downtown, at 1 Orms St. Most of the properties will have open houses on Saturday and next Sunday, and the listing agents will have details. [For more information, see www.hudsonandmarshall.com]

“We want bidders to be fully informed and fully aware,” Salvadore said. “…You don’t want buyer’s remorse.”

There will be a 5-percent premium due for each sale, all sales are subject to the seller’s approval, and 2-percent commissions are being offered to buyers’ agents.

Two of the 27 properties listed on the auction Web site are already off the block because they have buyers. One of the properties, a Providence three-family at 593 Public St., had been listed for sale at $49,900.

“The bank has a number they want to get,” Salvadore said. “…[But] typically, the first shot you get at these properties is the best shot.”

cdunn@projo.com