Sellers in the process of completing a shortsale with Bank of America (BofA) may receive a check in the mail from BofA as an incentive to complete the shortsale instead of allowing the property to go into foreclosure.

BofA extends these cash incentives when they stand to lose more through foreclosure than the amount of cash offered the seller from a buyer in a shortsale. If the home forecloses, the bank will incur extra foreclosure related costs, including maintenance, property taxes and lost interest (and principal) while the home sits vacant.

For sellers to qualify for the cash-incentive program:

  • their home loan must be owned and serviced by BofA; and
  • they must begin the shortsale process during 2012 and close by September 16, 2013, subject to a pre-approved sale price from BofA.

The bank has other selective qualifications as well, but has not made them public.

The average shortsale cash payment is $12,000, though sellers may receive up to $30,000 for a completed shortsale as long as they do not deviate from the terms of the shortsale agreement.

Sellers may call BofA to find out if they qualify at 877-459-2852, otherwise they will receive a mailed notice of eligibility.

first tuesday take

Great program, for the few (and we mean very few) sellers encumbered by an underwater mortgage owned and serviced by BofA (and who also meet other secret and mercurial qualifications).

Chase and Wells Fargo have also been known to offer cash to select individuals electing for a shortsale, however, all three Big Banks are secretive about their actual qualification requirements and conditions for payment, meaning: don’t hold your breath.

If you represent a lucky seller who is to receive a cash incentive, counsel your client to view the cash as a power equalizer in their shortsale negotiations with BofA.

For instance, if the pre-approved shortsale price is unrealistically high, the seller who is to receive a cash incentive – confident BofA does not want to be stuck with their home if they foreclose – can approach their lender to further negotiate the approved price or cash incentive to keep that price high.

Still, loan officers work within a net of what they can accept on a shortsale, all according to corporate standards. If the lower shortsale price the seller has agreed to does not fall within that net, the lender will be more than happy to continue collecting increased servicing fees on the seller’s delinquent account while waiting for an offer at the approved shortsale price.

Whether a seller is to accept a cash incentive or choose to let the property go to foreclosure depends very much on their personal situation. This includes:

  • how far along in the negotiation process they are;
  • how many consecutive months they have defaulted on payments; and
  • the amount of cash incentive offered compared to potential rent-free living and cash for keys they may receive upon foreclosure.

The effect on the seller’s Fair Isaac Corporation (FICO) score will be the same whether the seller forecloses or completes a shortsale, though the score will vary depending on how long they are delinquent (FICO has no way of reporting a shortsale versus a foreclosure).

At present, sellers completing a shortsale often have an easier time obtaining financing than those who foreclose, though we expect the eventual rush to compete to make loans will eliminate that aspect too.

Choosing which route to take out of homeownership is a balancing act, which the seller’s agent is primed to help their seller navigate, understanding a shortsale closing has a fee to be paid – and the foreclosure sale does not.

Related article:

Some pocket cash for your shortsale?

July Letter to the Editor: The credit score damage: foreclosure vs. shortsale

Re: BofA promises up to $30k in short sale bonuses from UT San Diego