Experts believe that the current level of housing inventory has to come down for the industry to get into a phase of sustained recovery. Short sale transactions offer a win-win-win situation to buyers, sellers, and lenders, and help clear the housing inventory available for sale. While short sales have risen in the last year or so, experts believe that banks are still not fully prepared to approve the transactions in a timely manner. Rick Shargo, vice president of marketing at RealtyTrac, said: “Interminable delays of six weeks to three months are not uncommon, or banks rejecting a 20% discount at short-sale only to ultimately take the property back and market it at 40 or 50% lower.”

Banks have to report their mortgage assets on a mark-to-market basis, and any sale at a price lower than the value in their books will mean a reduction in their reported profits. Bankers also complain that some buyers take advantage of the current situation, and demand a price which is way below the market price. Walter Molony, spokesman for the National Association of Realtors, said: “Short sales have taken far too long. The faster you clear off this excess inventory the faster you can stabilize home prices.”