More than 12,000 foreclosed properties with an aggregate loan value of $4.91 billion sold at auction during November in California, according to a report issued late last week by real estate advisory ForeclosureRadar. The firm said the number of foreclosure sales represented a stunning 432 percent increase from year-ago levels. Faced with such a large influx of defaulted mortgages and decreasing prices, lenders and banks have begun dropping their bids for foreclosed properties -- with almost no success. The ForeclosureRadar report noted that the average lender discount was $48,000 in November, up from $9,000 at the beginning of the year. Also noted was the percentage of sales being discounted, which was said to have doubled to 66 percent versus year-ago levels. “Lenders are starting to aggressively discount properties," said ForeclosureRadar founder, Sean O'Toole. “We were surprised by the size of the discounts, and even more surprised that most still go back to the bank with no investor bidding.� Which means, of course, that REO inventories in California are facing a pretty bad case of bloating. Unlike O'Toole, however, I'm not at all surprised to see lenders discounting their bids -- nor am I surprised to see a lack of investor interest. It's a simple matter of banks adjusting, but not adjusting enough. A $48,000 discount is roughly ten percent of the median property value in the state, depending on what point in time you measure from -- last May, most sources had pegged the peak median value in California at $480,000 or so. Property values have been dropping ever since, in some places precipitously, and in most cases are already well below that 10 percent discount number. I'm reminded of Charles Dickens here: It was the best of times, it was the worst of times. For those in the business of selling REO, there is more business now than there has been at any time in memory. The problem is that, in spite of the work to be had, very few can reliably find buyers. I hear daily from those in the REO business, especially in California, who have told me that they can't reliably churn any of the inventory they've got on hand. One CEO of a large outsourcer told me that for years, REO agents in the Golden State had complained about not having enough listings. "Now, they've got more than they could ever want, and can't sell a thing," he said. For more information, visit