It not only seems intuitive that Short Sales are better financially for banks versus taking a home back through foreclosure but statistics also show this is indeed true.  Some experts state that banks may actually make 30% to 45% more on a Short Sale than a foreclosure (keep in mind this isn’t true for all cases – each situation is individual and unique).  But, if this is the case, why do Short Sales take so long and why does it feel like banks aren’t willing to push these through their systems more quickly?  If you’ve done Short Sales chances are you have encountered many obstacles along the way; faxes not received, lost paperwork, files being closed without your knowledge, being placed on hold for hours on end only to learn that nothing new has happened to your file, promises made by negotiators not met, and the list goes on and on.

Some of these seem like stall tactics by the banks, and some may very well be.  But there are many reasons why Short Sales take so long (whether these reasons seem justified or not, they exist).  First of all, banks were not prepared for the sheer volume of Short Sales they continue to receive on a daily basis.  For example, a few months ago, we were told by Bank of America that they were reviewing over 725,000 Short Sales at that specific time.  Banks did not expect this inundation and were not properly staffed nor had processes in place to handle this overwhelming volume.  Secondly, what many people do not realize is that the banks are simply the “servicers” on these loans; they do not own the loan.  These loans were packaged up and sold on Wall Street as mortgaged backed securities and the actual owner of the loan is an investor and in some cases there can be multiple investors that have ownership on one loan.  It is the investor that controls the direction, acceptance, approval or denial of the Short Sale.  Also lenders continue to receive pressure from the government to do loan modifications and other government sponsored foreclosure alternatives.  Unfortunately, many of these programs have been ineffective.  Another challenge the lenders face is the number of incomplete or files of poor quality that are submitted to them on a daily basis.  When they receive incomplete files, they are forced to waste time reviewing these versus working on files that are complete, legible and make it as easy as possible for them to process.  And lastly another huge obstacles lenders face are the number of phone calls they receive on requests for status updates on Short Sale files which some banks have told us has reached up to 80,0000 – 90,000 calls per day.  Add these factors to issues that are out of the banks control such as Buyers walking, Sellers changing their minds part way through, other liens and judgments on the property that hold up the process etc. and you can see how this can all add up to lengthy timeframes.  So what is the take home message?  Have a little understanding of where the lenders are in these situations and although they often add to the frustration, try to keep a positive attitude and an attitude that shows them you are working to help them mitigate their loss.  That is what their main goal is and if they have the sense you’re on their side, you’ll find more cooperation and response.  Also understand that the lenders don’t hold all of the cards when making a decision of whether or not to approve a Short Sale, the investor(s) that owns the loan truly has that control.  And finally, do everything you can to make sure the packages you send in are complete, legible and you follow the lenders timelines of when to call rather than use the tactic of badgering them every day.  Do your homework before taking a listing to ensure the homeowner has evaluated all other options and is committed to the Short Sale process and also qualify that Buyer whose contract you accept and make sure they’re in it for the long haul.  Keep in mind, every one of these Short Sales is like a fingerprint and are a unique scenario with many variables.  Do your best to stay positive and stay the course despite these time laden challenges!

You are not alone if you feel this way.  Short Sales are extremely challenging, time-consuming transactions that take a ton of administrative work, expertise and extensive management.  So, why should you do them?  Why not refer them all out or simply tell potential clients “I don’t do Short Sales.”?  Well, the answer is really multifaceted.  First of all, Short Sales continue to represent a large and growing part of today’s real estate market.  Title companies continue to tell us that of the deals they are closing on a monthly basis, roughly 30%-45% of them are Short Sales.  Data shows that loan modifications and other foreclosure alternatives are not working.  This coupled with growing unemployment, rising gas and food prices, and an overall poor economy; homeowners are finding it more and more difficult to stay current on their mortgage payments and therefore are finding themselves in a situation where they are facing foreclosure.

Short Sales have become a segment of the market you can no longer afford to ignore.  You may even find that clients you helped purchase a home a few years ago are now delinquent and looking for your help to assist them in a Short Sale.  Do you really want to tell them you don’t do Short Sales and refer them off to someone else?  Unfortunately then, you are handing off a potential client for life and sending them a message that you can help them in the good times but when things get tough, you’re not available.  Helping a homeowner successfully avoid foreclosure through an approved Short Sale can be one of the most rewarding accomplishments you can achieve.  You will find the gratitude that homeowner has will carry over to extensive loyalty and potentially additional referrals.

So, in closing, yes, Short Sales are tough, they aren’t fun but they are an extensive part of the market today and you can incorporate them into your business and truly find rewarding success if you do them and do them well.