Banks are backing away from short sales, forcing sellers to pay extra at closing or demanding a promissory note for the amount due. One-third of borrowers owe more on their mortgages than their properties are worth, according First American CoreLogic.
When their situations were really tough, most banks preferred short sales because they were their best opportunity to get the most money back. But with an improving economy, and because the losses on many of these properties have already been written off the books, banks are increasingly reluctant to negotiate a short sale.
Today, banks demand 9.5 weeks to respond to a short-sale request, compared to 4.5 weeks a year ago, according to research firm Campbell Communications. Their reluctance is frequently stymieing sales and frustrating real estate practitioners.
“It drives me up a wall,” says Robert G. Hertzog of Summit Home Consultants in Phoenix. “[The bank is] holding my client hostage.”
The banks are backing away from short sales because instead of taking a loss, all they have to do is wait for stimulus money to come in and sit on it. Stimulus money has taken the motivation for short sales.