We’ve all heard or read stories about sellers attempting to short sell their home only to be foreclosed on mid-process, or even as the deal is wrapping up. I’ve certainly been a part of these kinds of transactions and though the cause was sometimes identifiable (buyers walked, seller is slow to cooperate with requests, etc.), many times it was not. In fact, there’s been a few times when I thought I’ve been able to undeniably prove that it was financially detrimental to the lender to foreclose on a particular home relative to a short sale. I’d rattle of supporting data such as, “lenders net 20% less on an average foreclosure vs. a short sale, due to foreclosure costs, tax costs, HOA costs, maintenance costs, liability costs, and opportunity costs of the illiquid money”, and “It’s better than a foreclosure, and beneficial for everyone involved.” Still, they’d foreclose, and I could never figure out why.
Recent research revealed that these lenders do not have to recognize losses to their investors in the case of a foreclosure, whereas with a short sale they do. This explains why there are instances where they prefer to foreclose rather than approve a short sale, as it actually is advantageous for them to do so. Apparently their reasoning behind the seemingly illogical and uncooperative negotiations did have some logic and strategy behind it after all. Side note: this is one of many great illustrations of how they act with only their best interests in mind.
A significant part of my job as a full-time negotiator is to uncover why these banks do what they do when it comes to short sales. Though I firmly disagree with their self-serving and even arrogant tactics, it’s helped me understand the reasoning for their efforts and in turn provide better service to our clients.
If you would like a knowledgeable short sale negotiator to bring this and the experience of working hundreds of deals to you, give us a call.
– Jeff Grant, President, ShhortSale.com