Why Lenders Are Backing Off From Foreclosures (And Choosing Short Sales!)

It is surprising to note for the past months, there has been a drop in foreclosure filing in Palm Beach County compared to last year — around 70 percent. Now, the drop in foreclosure rate cannot be attributed to an improving economy or a recovering housing market. It is simply because lenders realize it would not benefit them at all if they continue to fill the market with more foreclosed homes, when the same market is already overflowing with properties.

Putting more homes in the foreclosure market will definitely reduce home values and these lenders know they are the ones who will get hurt in the process, considering their huge inventory of REOs. Aside from this, there are also the holding costs to think about such as insurance and maintenance costs.

You also have to think about the legal problems lenders are embroiled in, in particular the robo-signing controversy. It has become more and more difficult for lenders to prove their ownership of the distressed home and many would like to avoid problems because of claims of illegal foreclosures.

So, lenders are now more inclined to accept a short sale proposal to avoid the hassles which go with foreclosing a property. A short sale is certainly a lot cheaper and if owners managed to submit all the correct requirements including a good offer, then there is certainly no reason for lenders to say no to such a sweet deal.

This is perhaps what many troubled homeowners should remember. It would help your situation if you make sure your short sale proposal is perfect or at least, good enough for the lender to respond. You might need to look into hiring the services of a professional short sale Realtor to guarantee success.

In any case, what is important is keeping your expectations real and being patient.