Craig Focardi of the Tower Group estimated that it coses a bank $58,759 and 18 months of time to complete a foreclosure.
Although banks are taking a long to time to accept short sales - part of a good negotiator might remind the bank;
In a declining market every month they wait makes the property less valuable;
The lender will have attorneys fees;
The lender may see an slower less liquid market with less buyers;
The bank will tie up capital in the ownership of the property and spend money, maintaining the property, paying homeowners fees and taxes.
Banks are between a rock and a hard place, if they have done a lot of lending in an area, accepting short sales or lower prices may jeopardize the security of their other loans, but if they don't face the music they could end up even worse.