Why do banks allow short sales?
Benefits of a Short Sale... |
Drawbacks of foreclosing... |
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Lenders' Options
Lenders have an option in California to do a judicial foreclosure where they can choose to sue the homeowner or they can choose a Trustee's Sale which is the most prevalent way of foreclosing on a property. The process of foreclosure is long and costly to repossess the property and put it back on the market. As long as there are no payments being made on the mortgage, the lender loses money. The quicker the bank can turn the property around, the more money they will recover. They are motivated, under certain circumstances, to accept less than what is owed in a short sale to save themselves money in the long run.
- Banks lend money - they do not sell real estate. They do not want to acquire properties to turn around and sell.
- In this troubled economy, the government has more say in the way banks conduct business. In an attempt to lower the monthly statistics about foreclosures in hopes of boosting the economy, the banks are encouraged to complete short sales.
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