Banks Pilot Cash Incentive Programs for Short Sales
January 5, 2012
Several real estate professionals say cash-back incentives that some lenders are using to tempt delinquent borrowers to do a short sale over a foreclosure are not very effective because it’s not clear on who qualifies for the program.
Some banks are trying out such short-sale incentive programs because “it's costing banks a fortune to do the foreclosure, and they want to cut their losses," says Sherry Lee, broker/owner of Lee Property Sales in West Palm Beach, Fla.
Florida, which has a high number of foreclosures, was selected by Bank of America to test such a program. The cash-incentive program ended on Dec. 12 and offered anywhere from $5,000 to $20,000 in relocation expenses to home owners who agreed to do a short sale over a foreclosure. In Florida, foreclosures can be a long-drawn out legal process, averaging two years.
Bank of America made the cash offer to about 20,000 home owners but only about 3,000 home owners expressed an interest, according to an article by the South Florida Sun-Sentinel. Some real estate professionals say that more home owners didn’t take part in the program because of computer glitches and not knowing the eligibility requirements for the program.
If the bank deems the program successful, the bank may roll out the incentive program to other states. Wells Fargo and JPMorgan Chase are also reportedly offering cash incentives for short sales.
"A year ago, banks weren't making offers like this. Now, it's a complete reversal in that they are proactively soliciting short sales," said Jack McCabe, chief executive of McCabe Research & Consulting in Deerfield Beach, Fla. "They are offering unbelievable deals."
Source: “Cash Incentives for Short Sales Get Mixed Response,” South Florida Sun-Sentinel (Jan. 3, 2012)
Updated: August 11, 2020