What's REALLY slowing down my SHORT SALE?

A short sale is NEVER short.  It's a misnomer if I've ever seen one...sort of like the STREAMLINE name associated with the FHA 203K Loan for buying and rehabbing properties...It just isn't true.

So I've recently read that the short sale taking so long is the fault of the bank, the buyer, the seller, the air we breathe and many other things both true and not.

To really understand WHY they take so long, it's important to understand WHO IS GETTING SHORTED.  That's right, when a short sale is done, SOMEONE is losing money.  It's usually NOT the homeowner although sometimes they do lose some. 

Usually the person or entity losing money behind the short sale is THE INVESTOR or INVESTMENT GROUP.

The concept is pretty foreign to most of us (sorry, the pun was unavoidable) but MUCH of our mortgage securities dollars are tied up in FOREIGN INVESTMENTS.  Remember a while back, there was a "bubble" that burst around the country and we blamed the real estate industry and mortgage industry for creating this bubble?  Well, that was only partly true. 

You see, an investor puts money up for a mortgage but it doesn't end there...those mortgages are aggregated and sold on an international stage as mortgage securities.

Very likely, if you or your spouse has a 401K, YOU are invested in some of those securities. Do you see how already this has become a little bigger than just a bank saying yes or no to a short sale?  There are hundreds of investors tied up in whether those securities gain or lose money but ultimately it generally does NOT come down to the bank having that control.

Let's take that short sale a step further...did you know that MOST BANKS are not authorized to agree to a short sale?  The approval for the dollar amount accepted is almost always the final say of the investor/investment group that owns the loan/security.  So yeah, often this increases the time for an approval because someone who is invested in mortgages isn't necessarily handling mortgages everday...sometimes it's a businessman or business in China (remember, they are holding HOW MUCH of our debt?) and so SOME TIME may pass before the file is even considered. 

Here's something that will really boggle the mind...the bank, acting as a servicer, has the ability to set the price and sign off on a home when it becomes a FORECLOSURE but not when they are in the process of the SHORT SALE.  Yes...this is why a short sale may occasionally be declined at one price and hit the market as a foreclosure $20,000 or more under what it would have sold for as a SHORT SALE.  It depends on who is ultimately making the decision. 

So there is a brief view of short sales from BEHIND the curtain.  Yes, all the other stuff that can delay a short sale is still in play, but this one thing, who is making the decision, is one of the biggest detriments to a "SPEEDY" short sale.