Real Estate Marketing & Beyond
A number of real estate professionals have said that cash-back incentives designed to tempt delinquent borrowers into a short sale rather than foreclose on their homes are proving to be ineffective, because lenders aren’t clear on who can qualify for the scheme.
Many homeowners don't understand the rules of the cash incentive programs
A number of banks have tried out this kind of short sale incentive scheme in the past year, because “going through with foreclosures is costing them a fortune,” says Sherry Lee, who owns the Lee Property Sales firm in West Palm Beach, Florida. “The banks are looking to cut their losses,” she told SunSentinal.com.
Florida was chosen by the Bank of America as the best state to test out its short sale cash incentive program, due to its high number of foreclosures and the fact that the process takes an average of two years in the Sunshine State. This trial run, which apparently ended on December 12, offered homeowners anything from $5,000 to $20,000 if they agreed to do a short sale rather than go through a foreclosure. Factors affecting the offer included the value of the home and the amount still owed by the homeowners on their loan, but it wasn’t made clear exactly how BoA calculated their offers.
According to SunSentinal.com, about 20,000 homeowners were offered cash incentives by the Bank of America, but of these, only around 3,000 showed any interest in the offer. Real estate professionals say that many homeowners chose not to take part because they didn’t understand the program’s eligibility requirements.
It’s unsure if BoA found the program successful or not, but if it did then we can expect to see similar cash incentive programs appearing in other states. Other banks such as JP Morgan Chase and Wells Fargo are also apparently offering similar incentives for homeowners to accept a short sale.
But while a lot of uncertainty surrounds the incentive programs at the moment, according to one real estate professional, homeowners should be biting the lender’s hands off for it. Jack McCabe of Research & Consulting in Deerfield Beach, Florida, told Sun-Sentinal.com that the incentives were a complete reversal of previous bank policies. “Banks are now proactively soliciting short sales,” he says.
“They are offering some unbelievable deals.”
Would you be tempted to cash in?
Image © Andy Dean - Fotolia.com
Getting people to understand short sales is pretty difficult as it is. Banks and especially B of A are notorious for not communicating well with borrowers and their agents. One point to be made here is what an unusual situation (opportunity) this is for those who really need to get out from under an unaffordable mortgage. The idea of banks paying people to get out of an unaffordable home is unheard of, and will probably never happen again once the housing crisis winds down. It is unprecedented. If borrowers understood this, they might be more willing to cooperate, but often the home owner does not realize how bad their finances really are, so they hang on. I've seen numerous cases where owners turned down money and ended up in foreclosure when they could have walked away with cash in hand.