Lenders Paying Cash to Borrowers for Short Sale
Lenders are luring the homeowners who are upside down on their mortgage to Short Sales rather than Foreclosure. Banks are offering large cash incentives of around $2,000 to upwards of $35,000;
In recent news, major publications including USA Today and CNNMoney have spotlighted the incentives provided by banks. These incentive programs are intended to provide homeowners with the resources and motivation to pursue a short sale.
As banks look to ramp up short sales, such incentives are becoming more frequent. JPMorgan Chase began their incentive program last year, for example, and Bank of America (which plans a 60-70% increase in short sales this year) piloted a program in Florida this past December. Wells Fargo offers incentives as well, though primarily in states where the foreclosure process is particularly lengthy.
For banks, short sales can be a cheaper alternative to foreclosure. The foreclosure process is lengthy and costly, so much so that providing up to a $20,000 alternative for a short sale is still a cheaper option.
In addition to the cost of the foreclosure process itself, foreclosed properties sell for less than short sales on average. According to the National Association of REALTORS®, foreclosed properties sold for 22% less than conventional sales, while short sales sold for around 14% less.