A hot topic:  Why do Short Sales Take So Long?

As home values have dropped by 20-30%+ in Jacksonville and Ponte Vedra, FL, many of the real estate transactions taking place are Short Sales.  The only thing short in a short sale is the amount of money to cover the existing mortgage.  By nature, short sales are Long Sales interjected with frustration, happiness, frustration, and back to happiness. They take forever.

So why do Short Sales take so long?  I've attempted to answer this question in a 2 part answer:

Answer Part 1: Understand the volume. After all the red tape and big bank shenanigans to try and get you to make just 1 more payment, there is a person at the end of the line that is the "negotiator".  This persons job is to look over the Short Sale Package and make a decision one way or the other.  You will never have anyone from the bank give you this persons contact info, just won't happen.  Your contract for purchase of your property must sit and wait in line behind 499 other bonafide real estate purchase agreements waiting for an answer on their short sale.  This part takes forever.

Answer Part 2: Understand the Financial impact to the bank. If a bank can put together systems to check your credit and send you junk mail offering all kinds of credit card offers every 3 days, they can surely put together a system and processes to flush thousands of short sales through every day.  Obviously they have the resources to do this.  However, they choose not to.

When your mortgage is $300,000, they have an asset on their books worth $300,000.  Even if you stop paying, it's still an asset.  Once they agree to take $200,000, they are instantly worth $100,000 less.  So in essence, they are strategically taking calculated losses by accepting short sales every month....but not too many as their stock prices would go to pennies.  Stock holders would panic and the bank could potentially collapse.

Conclusion: Once your Short Sale has a contract, it takes the bank 60+ days to give us an answer.  The banks are being pressured to speed up the process, but that's risky business (see answer part 2 above).  The best way to make sure your short sale goes through without any issues:  Work with an agent that has a lot of knowledge in Short Sales.  If you are reading this, you found one. 

Posted by Brad Officer on
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