If Banks Make More Money on Foreclosures than Short Sales, Why Am I Closing So Many Sacramento Short Sales?

A fellow blogger and agent on Active Rain, Pacita Dimacali, wrote a piece that included links which substantiate the theory that banks make more money on foreclosures than short sales. Pacita works in Alameda, about 90 minutes away from me in Sacramento, and she is also a contributor to my book, The Short Sale Savior. Pacita knows her stuff.

If the federal government is subsidizing lossses suffered by banks through foreclosure, it would appear that banks such as Bank of America, Wells Fargo and CitiMortgage have very little incentive to do a short sale. Yet, month after month, those same banks are approving my Sacramento short sales.

Now, Wachovia short sales are handled in a different manner. But that's primarily because Wachovia is a portfolio lender. Loans originated by World Savings, for example, that are now Wachovia short sales, close from sale date to recording in about 5 to 6 weeks.

I'll tell you why I suspect that my sellers are getting short sale approval and the sellers Pacita illustrates are receiving short sale rejections. I believe it has to do with short sale pricing and how I market those listings. See, banks are in the business of making money, and they probably don't care where the money comes from. The government can give it to them or short sale buyers can give it to them.

After all, if a bank takes the property in foreclosure, it will still need to ultimately sell that bank-owned home to a buyer. If the buyer is already standing in front of the bank, waving money and paying market value, why wouldn't the bank accept the short sale? As a Sacramento short sale agent, I fully realize that I represent the seller and have a fiduciary duty to get the seller the highest price possible, even though that money is not going directly into the seller's pocket. It goes to the bank. But the bank is also the ultimate decision maker.

At the moment, according to MLS, my short sale listing to sales price ratio average so far for 2009 is at 106.5% of the sales price. Yup, as bizarro as it sounds, that's right. I generate so much interest on my Sacramento short sales that buyers pay over list price. The banks are happy, the sellers are happy and even the buyers are happy. That's how life should be.