Finally, a statistical blog worthy of reblogging.
Thank you so much for doing the legwork to research this and supplying the link to share with our customers to show just another factual reason why lenders are more apt to approve the short sale rather than foreclose.
Why would banks agree to a short sale when they know they are going to be losing money? This is the question I get posed to me frequently. My answer: it costs them less money than to foreclose on a property; lenders’ primary responsibility is to mitigate their losses. Once we understand that, then the concept of a short sale is really not a mystery.
When you speak with short sale negotiators and other people in the industry, it is common knowledge that banks make more money when the sale is completed through a short sale, rather than permitting a property to go into foreclosure. This was the unspoken truth that everyone acknowledged but no lender published any data to support or deny these truths. Not having published data can be problematic for bloggers, as postings are much more credible when there is data to support your contentions, rather than anecdotal evidence.
Today, for the first time, I discovered published data which sheds light into the true disparity between homes that are disposed as short sales vs. those disposed as REOs after returning to the lenders after foreclosures. Short Sales net the banks between 13-26% more than REO sales according to Clayton Holdings after conducting a 6 month survey conducted between October 2009 – March 2010. (I've heard higher percentages).
13-26% is a nice tidy bag of cash for the lender holding those underwater mortgages; fantastic job of mitigating their loss. And people still wonder why short sales are approved.