It usually is NOT advantagous, however they are so inundated with short sale packages, have horrible negotiators and company policies, that most short sales wind up in foreclosure. Good news is that the government will help streamline the process later this year!

Aaron's answer is a good start; it also is not necessarily advantageous, but a result of circumstances and the willingness of the homeowner to attempt to work with lenders, banks and servicers. Most states have a process for foreclosure similar to MN and then some Federal laws also apply. Each situation has its unique qualities and the time-consumer nature of the processes and made more complicated by some of the problems Aaron notes.

The problem is hugely complex and impossible to answer completely but here are a few issues:

Many mortgages have mortgage insurance and the company that is insuring the mortgage wants to do everything it can to not pay out on claims.

Banks are so buried by these that they are too understaffed to handle the load.

The sellers sometimes don't have a good reason to ask for a short sale, which can make banks hesitant to negotiate.

Many of these mortgages were repackaged and sold on the stock market, which means 10-20 investors may need to sign off of the short sale to get approval.

Some agents do not know how to do short sales successfully.


There are more, but this is a large portion of the reasons.