Short sales are becoming much more common in today's economy. Lenders prefer to see distressed homes sold at a reasonable discount rather than going into foreclosure.
According to the National Association of Realtors short sales have skyrocketed and now represent a fairly large percent of all existing home sales.
In California short sales make up an even higher percentage and some experts say that the amount of time it's taking to close short sales it is really slowing down the housing markets recovery.
Keith Gumbinger, an analyst at HSH Associates, a mortgage research company says, "It does delay the recovery process and prolongs the downturn. That's a piece of the marketplace that could be performing that is not."
California has been particularly hard hit by the delays with one of the highest percentages of the country's distressed homeowners. On average it is taking three to nine months for banks to process short sales while sellers in other states are facing similar problems.
Joe Martin, a broker for RE/MAX in Mesa, Arizona stated that some of his clients have been waiting for over a year for short sales to close. One of his arguments is that banks just don't have the staffing to sort through all the applications to determine which offers to accept or not.
Many short sales officers have hundreds of files on their desk to sift through at any given time.
JP Morgan Chase, one of the country's largest mortgage lenders, has doubled up on its short sales staff in the past 12 months to help speed up the process of distressed home sales. Banks are also doing all they can to keep up with the rapid change in the real estate market regarding the increase of short sales.
A JP Morgan Chase spokesman recently said, "Short sales have an important role in the market. For people who can't afford their house it might be a better solution for them, the neighborhood and investors than a foreclosure."
The biggest change to affect short sales nationwide came last month under the government's new "Home Affordable Foreclosure Alternatives" program (HAFA) which was introduced to help standardize short sales. Now, before approving a borrower to participate in a short sale, lenders have to set a minimum sale price they are willing to accept. Then, once an offer meets the minimum, a bank must decide on the transaction within two weeks.
To some industry experts the introduction of the new rules may have come too late.