Why banks do short sales?

In order to understand real estate short sale and how to do foreclosure short sales, a short sale real estate investor needs to understand why banks do short sales, the real estate short sale process and how short sales work. Before doing a short sale, real estate investors need to understand why banks do short sales.

Why do banks do short sales?

It is sometimes hard to imagine why banks would accept 50% or so less than what is owed but the truth is banks do short sales all the time. Why, then, would banks do short sales?

There are four key reasons why banks do real estate short sales.

Reason #1 why banks do short sales - homeowner's distress

The first reason why banks do real estate short sales is if the homeowner can prove distress. If the homeowner cannot prove distress and a short sale is being done to that homeowner's property, the bank will most likely reject the real estate short sale attempt. Why would the bank reject the short sale attempt? Well, if they don't then everyone would be trying to short sale their mortgages!

So, the homeowner need to not be current on his or her mortgage payments and the homeowner or the short sale real estate investor must prove some kind of distress on the homeowner's part such as loss of job, illnesses, divorce attorney fees, etc... and that the homeowner can no longer afford the real estate property. If the proof of the homeowner's distressed situation is solid, the bank will be more likely to accept the short sale offer.

Reason #2 why banks do short sales - high cash reserves

Another fact about real estate short sales that a short sale real estate investor should know is that in the banking industry, when there is a defaulted loan, the bank has to put cash reserves against the defaulted real estate property.

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