Bank of America‘s cash-back incentive, which tempted delinquent borrowers to do a short sale over a lengthy foreclosure, ended Dec. 12 with mixed reviews from real estate agents and tepid homeowner response.
The Florida-only program offered between $5,000 and $20,000 in relocation expenses to qualified homeowners who agreed to vacate their homes through a short sale in lieu of the average two-year foreclosure process.
But as of early December, only about 3,000 homeowners of 20,000 solicited by the bank had expressed interest in the plan, which one real estate consultant said was unthinkable before the robo-signing scandal heightened the foreclosure chaos.
“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. “They are offering unbelievable deals.”
A short sale is when a lender agrees to accept less for a home than what is owed on the mortgage. Sometimes, the bank also will agree to waive the deficiency judgment — money still owed by the homeowner on the mortgage debt.
Real estate agents say banks, including Wells Fargo and JPMorgan Chase, began offering cash incentives about six months ago to homeowners who agree to do short sales. With foreclosures taking an average of 749 days in Florida, according to a November RealtyTrac report, it’s cheaper to pay off an owner than take them to court, agents say.
“It’s costing banks a fortune to do the foreclosure, and they want to cut their losses,” said Sherry Lee, broker/owner of Lee Property Sales in West Palm Beach.
Lee said one of her clients got $45,000 from Chase to do a short sale, but most deals are between $10,000 and $20,000.
But she had little luck with Bank of America’s test program, which she said used an unwieldy computer program and had unclear directions on who was eligible.
“People want straight answers from us brokers, and I couldn’t get them,” Lee said.
Bank of America spokeswoman Jumana Bauwens said she couldn’t comment on concerns unless they dealt with a specific case, but that the company was “pleased” with the homeowner response.
Bauwens said Florida was chosen to test the program because of its high number of foreclosures. If it is deemed successful, it could be expanded to other states.
To qualify, homeowners had to submit their short sales for approval by Dec. 12, an extended deadline from an original Nov. 30 date.