It is rare for me to lose a short sale due to valuation. So, I'm not even certain that when a bank rejects a short sale due to value whether the bank really prefers foreclosure. Because sometimes the bank prefers to foreclose. Doesn't matter what the price is. I know that concept is difficult for some people to wrap their heads around, as I hear over and over from agents and buyers that it's better for the bank to do a short sale, which is not always correct. Well, it's correct that I hear it. The premise, however, is what's wrong.
It's not always better for the bank to do a short sale over a foreclosure. Must have been an eager short sale agent fresh from certification who designed that marketing. The statement is echoed everywhere like a mantra: it is better for a bank to do a short sale. Baloney. Agents should stop repeating this lie.
Get one thing straight. Banks are under no obligation to consider a short sale much less grant a short sale.
I can say this, though. Buyers who step up to the plate and offer the asking price of my Sacramento short sale listings stand a very good chance of closing escrow. That's because the sellers and I review the comparable sales the same way a BPO agent will do it. And it's the BPO agent's advice that the bank typically relies on for value. If a buyer lowballs that price, well, the buyer gets what the buyer gets. Which is generally nothing.
Sometimes, I go back and track the homes that fell through the cracks -- the short sales the banks rejected. 100% of the time the bank has sold that home as a bank-owned home for less money than the bank was offered as a short sale. Is the bank stupid? No, the bank is not stupid. The bank did not want to sell that home as a short sale. The bank made more money selling it as a foreclosure. Just because you and I can't see the profit doesn't mean it does not exist.
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