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Banks’ brilliant idea to give cash incentives to short sale

The housing crash

Now that some of the causes and effects of the housing crash are becoming universally agreed upon and banks are ordered to pay billions in civil lawsuits and settlements for illegal foreclosures, the big banks are struggling to regain their composure after overlooking simple fixes like not continuing robo-signing documents illegally without human review before kicking people out of their homes.

One of the major problems is the impact foreclosures have on neighborhoods as opposed to short sales or regular sales. Today, in an editorial on this very topic, real estate broker Erica Ramus outlined the sickening virus REOs are, saying, “So it’s a great time — to be an investor. To be a seller… well, hang on tight. These REO sales are going to be haunting us for quite a while.”

Some may say it’s too little, too late, but some banks are choosing to make it easier for homeowners to short sale for less than what they owe on their mortgage, which banks have traditionally been extremely uncooperative with, leaving sellers hanging for months just to not approve the deal and ignoring calls from hard working Realtor pushing to help consumers not live with a foreclosure on their credit report.

Cash incentives to short sale

According to Bloomberg, banks are looking at ways to shorten the process and clear the foreclosure backlog by putting less foreclosures onto their books. Some banks are now pre-approving short sales and even offering cash incentives for borrowers to short sale and avoid foreclosure as it is costly to maintain, repair and market a foreclosed property.

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Bloomberg obtained a letter from JPMorgan Chase to a homeowner stating, “You could sell your home, owe nothing more on your mortgage and get $30,000.” The homeowner took Chase up on their offer, sold the home for $200,000 less than she owed on the mortgage and walked away with $30,000 in cash she is using on moving out and on the deposit on her new rental.

“I wondered, why would they offer me something, and why wouldn’t they just give me the boot?” she said. “Instead, I’m getting money.”

“When a modification is not possible, a short sale produces a better and faster result for the homeowner, the investor and the community than a foreclosure,” noted a spokesperson for Chase bank. It seems so obvious as distressed sales continue to rise and some expect a 25 percent jump in 2012 alone which the banks are surely bracing for. This change in tune is pretty dramatic and while it is unclear as to whether this is a national plan or a local offer, it is a far different approach than banks have taken in recent years.

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Tara Steele is the News Director at The American Genius, covering entrepreneur, real estate, technology news and everything in between. If you'd like to reach Tara with a question, comment, press release or hot news tip, simply click the link below.

28 Comments

28 Comments

  1. Ginger F

    February 8, 2012 at 12:12 am

    I have an investor with four short sale properties right now. When we got contracts on the first two Chase originally came back with a counter (let's say $100K for example) and then two days later when the buyers were about to say yes Chase came back and suddenly wanted $110K. They also called to tell me I needed to add a $10K incentive to the sellers side of the HUD (which the seller didn't even know about). I in-turn said no way is a buyer going to pay $10K more than your last counter because you are offering an incentive to the seller. Chase's reply "the two are not related." Really?!! Seller then said they would waive the incentive so we could make the deal happen and Chase said NO! (What?) Apparently seller has no choice once it's been offered so the deal fell through! That day just confirmed to me that the banks have absolutely no idea what they are doing and that I would rather put a hot poker in my eye than deal with banks on short sales(well not really but close:)

  2. Torrey Russell

    February 8, 2012 at 9:30 pm

    We have had an offer like this on the table for over 3 months… my broker has been trying to tie up all the lose ends with Chase who has NEVER spoken to me… and wont. I have been unable to get anyone on the phone… for 3 years who has any more authority than to "collect data'. How frustrating to watch our house now sell for 1/3rd of the 2007 value. We still are unclear about whether we will actually get a check or not… and, we see people getting a 1099 for the difference in the lower price from what they owed as taxable income… how about that – a couple of hundred thousand in unreported income for last year suddenly now owed. Watch out for those incentives… and if you haven't filed Chapter 7 prior to the event you get to take all the difference as taxable income – WOW! Caveat Emptor

  3. Arkansas payday loans

    November 5, 2012 at 6:10 pm

    Gosh, I wish I would have had that information very nice

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