If your lender offered you as much as five figures to move out of your home because you couldn’t make your mortgage payment, would you do it or wait for the lender to foreclose?
The answer would seem to be a resounding “hell, yes.” But for whatever reason, many people sit tight.
When Bank of America offered short-sale incentives of $5,000 to $20,000 to Florida home owners late last year, only 3,000 home owners expressed an interest in participating.
One reason may be that owners who are not making their mortgage payments live rent-free while the foreclosure process winds its way through the red tape and they want to draw that out as long as possible
But, a cash "bonus" paired with a short sale that lets you avoid a foreclosure on your credit history can be a sweet deal.
An incentive payment might be as little as $3,000 via the Home Affordable Foreclosure Alternatives(HAFA) program. But private lender programs sometimes offer 10 times that much, depending on where you live, which short sale program you use, and which company holds your mortgage, says BusinessWeek.
“Banks are nudging potential sellers by pre-approving deals, streamlining the process, forgoing their right to pursue unpaid debt (deficiency), and in some cases providing large cash incentives,” Moody’s Senior Credit Officer Bill Fricke told the magazine.
If you bank makes an offer and you bite, these four steps will ensure the smoothest possible process:
1. Make sure the lender can’t come after you later to collect any shortfall between what you owe on the mortgage and what you’re selling your home for. Some, but not all, states prohibit that.
2. Talk to an attorney and a tax adviser so you know what will happen financially after the short sale. If you sell now through the end of 2012, the tax rules for short sales say you won’t owe any income tax on $1 million (singles) to $2 million in forgiven mortgage debt (married couples). Those tax rules, part of the Mortgage Forgiveness Debt Relief Act, expire at the end of this year and only apply to your primary residence.
3. Hire a REALTOR® experienced in short sales in your neighborhood to handle the transaction.
4. Figure out where you’re going to move and sign a lease now because your credit score will likely drop if you stop paying your mortgage and short sell your home. A low credit score can make it more difficult to get a rental home.
By the way, you can ask your bank if it’s willing to work with you on a short sale, but asking for an incentive too…it can’t hurt. Just Ask them if they are offering any “relocation incentives” for owners in your state or in your situation.
Call me directly to discuss your short sale options…561.602.1258
Thanks for reading…Steve Jackson
