Home > Avid Law Center, Foreclosure, Short Sale > Banks pay big money for short sales

Banks pay big money for short sales

To help ease the foreclosure rate, and cut their losses, banks have started paying out big bucks to distressed homeowners on the verge of losing their homes to foreclosure – to the tune of $35,000 a pop. This incentive to homeowners who owe more on their house than it’s worth, or homeowners who are already delinquent on their payments is meant to steer them in the direction of short selling as opposed to foreclosure.

Typically, short sales are avoided by banks since they take a loss on the home but in recent years, it more beneficial to banks to short sell than to foreclose, leaving homeowners, some who have even been denied a loan modification, skeptical at this new approach.

CNN Money reports:

“From the bank’s point of view, the offers make sense, according to Tom Kelly, a spokesman for Chase Mortgage, who would not comment on Pierce or other individual cases. “The first choice is a modification but if that’s impossible than a short sale is a faster, more efficient solution,” he said.

For the banks, foreclosure has become an increasingly difficult and expensive option. Homeowners have learned to fight the banks tooth and nail, dragging out cases for years.

And as the cases drag, expenses grow. Homeowners not only stop paying their mortgages but they stop paying property taxes and conducting normal maintenance as well. Roofs, siding, plumbing and other parts of the home deteriorate and the property loses value. By the time banks take possession, they’re out tens of thousands of dollars.”

Banks also are acknowledging a long-known fact that short sales command higher prices than foreclosed homes. For perspective, foreclosed properties sold for an average of 22% less than conventional sales in December. Comparatively, the discount for short sales was only 14%, according to the National Association of Realtors.

Whether sellers can expect incentives from their banks depends on multiple factors, including where they live as this program hasn’t been introduced nation-wide, yet. Still, generally speaking, short sales are a great alternative for homeowners looking to avoid foreclosure and have many benefits even if the banks are ponying up the incentive and we recommend speaking with a short sale specialist and attorney to discuss your options.

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