Why banks short sale?

There are many reasons why banks short sale. Many people often wonder why banks would do short sale and let the homeowner off the hook scott free. The truth is banks have reasons why they do short sale. The reasons why banks short sale are not difficult to understand and are discussed below.

Reasons why banks short sale

Below is a list of some reasons why banks do short sales.

The homeowner is in distress and cannot afford the mortgage payments

When the homeowner is truly in distress and can no longer afford the mortgage payments, banks really cannot do much about it. Any route the bank takes will cost the bank in some way or another. The bank can choose to:

• spend some money foreclosing on the homeowner which could tie up their cash reserves for up to a couples of years. Even if the bank forecloses on the homeowner, the bank still has to sell the property in a sheriff's sale. Since the property is not worth as much as the amount owed, the bank is most likely to make a loss in the sale.
• take the homeowner to court and risk the homeowner filing bankruptcy which also could keep the debt on their bad debt books for awhile, or
• the bank can accept a short sale and write off the debt instead of nurturing a bad debt in its books.

Other reasons why banks short sale are:

The real estate property is in foreclosure

Sometimes knowing that the homeowner cannot afford to pay the mortgage payments does not satisfy the bank. Some banks need to see that the homeowner's situation is that bad before they start looking into accepting a bank short sale more seriously. Like homeowners, banks are also in denial about the foreclosure situation. Some banks hope that the homeowner will not go through with foreclosure, not file bankruptcy, and will eventually find some way to pay them back. They wait until they have spent some money on the foreclosure process before reality kicks in.

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