Of the homes closed in the 2010 third quarter, one in four homes were considered distressed properties. This is according to data just released by RealtyTrac. Distressed properties here are defined as those in default, scheduled for foreclosure auction and REO.

The distressed properties sold for an average of 32% less, averaging $169,523, compared to non-distressed properties, which had a third quarter average sales price of $249,721. RealtyTrac reported that the 32% is the highest distressed property discount it has seen since the 2005 fourth quarter.

Kentucky, Ohio and Tennessee saw the biggest discounts for distressed sales, ranging between 42 and 45%. Other states above the 40% mark were Illinois, New Jersey, Michigan, Pennsylvania and Georgia.

In a few states, the percentage of distressed property sales was near or above the 50% mark, including Nevada at 54%, Arizona at 47% and California at 40%.