Two other entities insure another 10 percent to 20 percent of all American Mortgages. Those two entities are FHA and the VA Loan Program. All veterans benefit from a short sale of a VA Loan because it helps reduce losses on the VA Loan Program. Up until recently many experts speculated that the FHA Loan Program would need a bailout. Fortunately, the program's finances have improved and it looks like it will no longer need a bailout.
But, every short sale that helps the program reduce its losses helps it move further away from a bailout. I am sure you are asking, "Why does a short sale help a bank reduce its losses compared to a foreclosure?" The reason is because they get to sell the house at today's price, versus what it will be worth six to 12 months down the road. I just did a comparison and pulled up sold listings. All of the listings were the similar properties in similar neighborhoods. First, I looked up the average selling price per square foot of homes that sold in Spring. They sold for an average of $103 a SQFT. Then I pulled up homes in the same neighborhoods that sold as REOs in the last two months. They are sold for an average of $85 per square foot. These homes average 1,700 per square foot. That means a 1,700 REO sold for $30,600 less. Ouch!
The other person who is getting value is the buyer. They get a better deal in today's market than buying a home from someone who is trying to squeeze out every penny. The seller also benefits. They will be eligible to buy another home in 24 months. You have a better chance of getting a job, because many employers check that nowadays. A short sale is a win-win for everyone involved.