Eric,

There are a number of reasons why a short sale takes so much time. In theory it sounds simple....the bank just decides to accept less money than is owed to them and then move on. The issue is it's sometimes very difficult for banks to identify and resolve all concerns attached to the propetty. In some cases there can be a 1st and a 2nd mortgage, a line of credit, liens on the property, marital issues, an owner that is not easily contacted etc.

Until this is unraveled, banks can not move foreward. Additionally, there are so many short sale and foreclosures currently in the process the banks are not able to keep up with the work load.

short sales virtually always take 3-6 months, when there are 2 mortgage companies than you have a nightmare. the first mortgagee does not have to give the 2nd anything and will not take less if they know the 2nd will get anything. the 2nd needs to realize if they dont accept something and make the short sale work, they will get nothing if it is foreclosed.

Short Sales typically take 2-6 months- unfortunately. I've seen them take as little as 3 weeks too. It all depends on what stage of the process one comes in at. If the lender has approved the price and the terms of the short sale already- it could be fairly quick.

As far as the second part of your question- I think Michael Ceprano is on target. The second mortgage holder usually gets pennies on the dollar of the short sale proceeds... So, the offers are usually rejected in vain- when the first accepts, the second gets nothing. Just a stall tactic.

Eric, I think it can be explained much simpler. The second always wants more then the first is willing to offer and if it is a traditional second, they simply try to stall, hoping to "coax" the first into giving more, it is all a negotiation, as they know that once the home forecloses, they will be completely wiped out with no recourse.
If it isn't a traditional second and it is a HELOC or Home Equity Line Of Credit, then the Lender has a much greater bargaining chip in their hands, as the HELOC is actually a revolving line of credit, much like a credit card, and the debt will follow the seller forever, in its entirety. You can either pay it or file BK, if you want to rid your self of it, even if the home is foreclosed, which would only de collateralize the loan only, not eliminate the debt. With this, the second Lender knows that they don't have to take the typical $1k that a typical second will get, because they have the ability to come get you, possibly garnishing your wadges, seizing assets, etc.
Maybe that wasn't simpler.

Sort sales take a long time because there are over a million right now on mortgage company desks and they are cutting costs by laying off employees. Imagine if all of a sudden the number of cars needing new tires went up 100 fold... how long would the line at the tire store be? Your short sale offer goes on the bottom and when they get to it they get to it and frankly they dont care if the deal falls apart because they have many more to deal with.

Often the second has a PMI policy even though you dont know it. The bank is paying for it which is one reason the seconds interest rate is higher. Usually the second has to run it past the PMI company. In addition the second is just begining the process when the first agrees. Even thought your agent may have faxed them at the same time the second has to wait for a commited offer from the first to consider it a serious ofer.

In some cases the second may actually order a new BPO or crunch the numbers and decide to just let it ride and come after you after. Even though foreclosure removes the lien on the property it may not relieve you of the obligation to pay the debt.

If you do have PMI on the second the PMI company can turn it over to a collection agency if they dont agree to accept the offer from the first as payment in full. It's important to get in writing that they accept the money as "settled for less than owed"