So many answers:
Internal organizational issues
High Volume
Market Volatility
The owners/slow/poor responses

No, it makes no sense, but nothing in this market does.

VOLUME.... I have been dealing in short sales for well over a year, and the response time is finally starting to shorten because the Loss Mitigation department is finally getting the proper help. I sympathize with you, It is extremely frustrating when the lender has all the necessary documents, the short sale amount falls within their guidelines, and yet they still take 60 to 90 days to respond.

Just keep on them, and try to build rapport with the person sitting in the cubical, with 40 files stacked in front of them, dreaming about their upcoming vacation...

Welcome to the CLUB! No one understands this stupid, foolish, self-defeating concept! No it doesn't make sense and it's only getting worse. Now some banks won't even discuss a short sale if there is a second mortgage - they have too many projects on their plate where they are the only lender! It doesn't even matter if they will get every penny they are owed, if there's a second to negotiate, they walk away.

Does it sound like I've got one of those in front of me right now! Tears, screams and threats later - YEP!

Often times the company negotiating the short sale is a department of the servicing company. The loan was sold to an investment group long ago. So, once it is negotiated it must go for secondary approval. Sometimes it is reviewed by a committee that only meets 1 or 2 times per month. Since they have to answer to investors sometimes they need to season the property to prove that this is the best offer they are going to get. Lastly, the longer they string it out the more likely someone will come in with a competing bid - they often disclose the amount to "auction" up the selling price.

Banks are in the business to make money, not lose it. As with a seller trying to hold out for a higher price, they do what they think is best to make money. Just like a normal seller that holds out, sometimes it ends up costing more.

Hi Lola, I agree that it often takes lenders an insanely long time to close loans. It partly has to do with the restructuring of the market recently, but also with the endless pass offs between mortgage professionals within a company. I am a lender myself, and the company I work for frequently closes loans within a week. If you are unhappy with your current lender, I would be happy to talk to you about the possibility of switching to our company. You can email me at catherine.thrasher@gmail.com. Good luck!!!

There are compounding reasons it takes so long. Some times it just has to get approved by 10 different people before it actually can happen. Many times banks are just the "middle man" and they have to get approval from some investor that could be miles & miles away. Sometimes, they take their time on purpose hoping to get better offers. Many times, they order a whole new appraisal, and the appraiser just happens to be backed up and isn't able to get them an appraisal for a couple of weeks, so essentially they won't even start the process until they receive an offer, then they won't do anything until they receive at least 1 appraisal and sometimes they get multiple ones, THEN they go through their paperwork and try to determine if the loss they'll take on the books is better than taking over the property and trying to sell it themselves.
As one banker told me during a Short Sale Transaction after I sent him all of the sold comps on a house we were trying to work, on..."We'd rather just take a chance that you're wrong by taking it over and trying to sell it ourselves instead of taking a steep loss up front."
Crazy.

Lola.. Having gone through this market in the 90's I think the answer is that Lenders are much like the people who wind up in financial difficulties... they don't prepare for the problem and are overwhelmed when it finally hits them in the face. Most lenders/banks do not have a contingency plan to handle short sales or foreclosures even though they have known for almost a year they would be facing these problems..I bet almost none of these companies have a full time REALTOR® on staff to help value the properties or a maintenance person who can give reliable estimates on repairs. They certainly don't have the staff to process these loans and a program set up to deal with them. About the time they figure it out the market will have settled down.