Understood, and what you say _may_ factor into the thinking re: loan modifications, but my question was about short sales. In these cses the homeowner wants out

Understood, and what you say _may_ factor into the thinking re: loan modifications, but my question was about short sales. In these cses the homeowner wants out and there is a willing buyer at X (which is less than the amount owed on the loan Y). In these cases why would the bank drag their feet when offered X (writing off Y-X) and opt to foreclose and accept Z which is .5X? Unless they are in some weird tax situation where a dollar written off is worth more than a dollar earned (unlikely) the only motivation I can think of is spite or ineptitude (since the owners credit is ruined regardless and the bank makes less money). There is perhaps some consideration to the fact that foreclosures are sold "as-is" for cash rather than financed with contingencies but that can't be worth the dollar amounts we are dealing with...