The realities in the current housing market dictate that there are substantial financial benefits to the lender in agreeing to a short sale with the homeowner. Primary among these direct benefits is the possibility of quickly eliminating further expenses to the lender associated with this distressed property while concurrently providing the lender with the highest amount of immediate cash possible.
At the same time, the alternatives to the lender in denying the short sale are very limited and expensive, including forcing the homeowner into foreclosure or taking back the title to the property through the process of deed-in-lieu. A foreclosure requires a lengthy and expensive legal process, and both alternatives require that the lender take the now-vacant property back into its inventory of distressed properties. Holding the properties in inventory requires that the lender itself bear the costs of trying to maintain and sell the property, both of which require additional time and expense for the lender. Add to that the fact that the market for such homes continues to decline in many areas, and the opportunity for the lender to successfully sell the property outside of a negotiated short sale becomes challenging.