A total of 188,748 homes in some stage of the foreclosure process sold in the third quarter, down 31% from a year ago and 25% from the previous quarter, according to RealtyTrac, an online foreclosure marketplace. Many lenders froze REO sales in October to review affidavits that were allegedly signed without a review of the documentation. Even though those banks have refiled affidavits and mortgage giants Fannie Mae and Freddie Mac cleared real estate agents to resume marketing REO, demand for these homes could still wane in the months ahead. "The foreclosure-processing controversy, which was brought to light at the very end of the third quarter, could chill demand even further — particularly for foreclosure properties," said RealtyTrac CEO James Saccacio. "A quick but responsible resolution to that issue would be ideal to help the market continue to properly clear out foreclosure inventory and get distressed properties into the hands of qualified buyers and investors who will likely add value to those properties and the neighborhoods they are in." The average sales price for homes in the foreclosure process was $169,523 in the third quarter, down 0.44% from a year ago and down 2.46% from the previous quarter. Properties that were not in foreclosure sold on average for $249,721, up 4.36% from a year ago and 6.42% from the second quarter. The 113,933 REO sales dropped 35% from a year ago and sold on an average discount of 41% from traditional sales. The discount is higher than the 35% reported a year ago. REO sales accounted for 15% of all sales in the third quarter. A total of 74,815 short sales were conducted in the third quarter, down 24% from a year ago. These transactions came at an average discount of 19% but take noticeably longer to close because of the amount decision-making involved from banks, servicers and investors. Short sales accounted for nearly 10% of all sales. Distressed home sales accounted 54% of the Nevada market, and while that leads the nation by percentage, it is down from 62% a year ago. Distressed sales made up 47% of all sales in Arizona, and 40% of sales in California. But the highest discounts on these transactions came in Ohio, where a home in some stage of foreclosure sold for 45% below the state's traditional sales. Discounts in Kentucky were 44% and 42% in Tennessee. Write to Jon Prior.