Yes, short sales DO take much longer than foreclosures. Short sales and foreclosures are fundamentally different in that a home that is foreclosed is owned by the bank, whereas a short sale is still owned by the homeowner. Though the home that is being sold as a short sale is still in the possession of the homeowner, the sale must be approved by the lender, or in some cases lenders, before the sale can be completed.
There are several reasons why the short sale process takes much longer than the sale of a foreclosure, mostly having to do with the process of getting approval from the lender(s), or what is called “third party approval”. Another reason is that even though there is a somewhat uniform process of dealing with short sales, banks all have their varying processes. Some banks have streamlined processes, some don’t.
Foreclosures are familiar to the banks and very cut and dried. The bank owns the property. The bank is not in the business of owning property. The bank puts it on the market and keeps lowering the price until it sells. Done.
Short sales are somewhere in the gray area in so many ways. The owner is trying to sell the house at a price somewhere short of the amount owed. There are several layers of negotiation and exhaustive paperwork that must be done exactly per instruction, (which is often very nebulous instruction) before the agent even gets the house on the market. Then the paperwork usually has to be resubmitted as time goes on. It can be frustrating.
There are many myths surrounding short sales. Some people have had bad experiences and those can be amplified. The short sale process is generally better for the seller, better for the bank, and better for the neighborhood. Homebuyers can also benefit by getting a home at a lower price, although the time involved is certainly longer.
But most banks do realize that the short sale process is much better than foreclosure, it costs them less, it keeps the house from deteriorating further, and it keeps the neighborhood from being affected even more negatively than it is by foreclosure. It also keeps the assets off of their books, which is important to their bottom line.
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