Encouraging homeowners to opt for short sales as an alternative to walking away from their mortgages is a new tactic banks, like Wells Fargo and Bank of America are using to get homeowners to avoid foreclosure — especially in neighborhoods already spilling over with empty properties.
To convince borrowers that selling their home is the right route to take, banks are offering hefty cash incentives that many homeowners won’t want to pass up.
Short Sales Help Avoid Foreclosure
In short sales, homeowners sell their house for less than what is owed to the bank, and the bank forgives the excess debt. Some homeowners are dead set against a short sale, because it means they’re likely taking a loss on their investment.
Even in a troubled housing market, many steer away from this option despite financial hardship or the threat of an underwater mortgage.
For some, the only alternative to this type of sale is foreclosure. Both homeowners and banks want to avoid foreclosure, because they negatively impact personal credit scores and push more empty homes into a market with a massive number of real estate owned (REO) properties to manage.
Banks Offering Cash Incentives
To ensure borrowers avoid foreclosure, banks are offering cash incentives of up to $35,000 in exchange for a short sale. The incentives are geared toward homeowners who owe more on their homes than the property is worth and who are seriously delinquent on their payments.
The new incentives are taking homeowners by surprise, largely because many have already applied and have been turned down for loan modifications.
For banks, however, the incentive route is effective and inexpensive since many homeowners have begun initiating costly foreclosure battles. Some homeowners are ceasing to make property tax payments and have stopped conducting important home maintenance, creating more costs for banks.
Wells Fargo and Bank of America are already offering incentives, but both have limited their programs to states like Florida where the foreclosure process can be lengthy. Homeowners who want to learn more should contact their bank to find out if this option is available for them.