Why would a Lender approve a Short Sale?
If a lender rejects a short sale, they will wait several months to get the property back through foreclosure, then take several more months to get it sold. During these many months, the lender has received no payments and the market has likely dropped further. A 2002 study by Craig Focardi of the Tower Group estimated that the entire cost of a foreclosure was $58,759 and took 18 months. Other factors that can influence a banks decision include the liability risk it assumes by owning the property after foreclosure, the money tied up during the holding period for a foreclosure and REO resale, additional costs associated with an REO such as attorneys fees, as well as the additional reserves it will need if REO’s rise in the banks portfolio. An REO stands for Real Estate Owned and means the bank owns the property.
