Short sale often provides cash incentive for homeowners

Q.I heard that some banks give homeowners money in a short sale to help them move out of the property. Is this true? – Cathy

A.It sounds too good to be true, but it’s legit. The Sun Sentinel wrote about this in June. Many lenders will offer homeowners a few thousand dollars to leave the home in good shape following a foreclosure, but some lucky borrowers get up to $20,000 for completing short sales.

Some lenders offer financial assistance, either through internal initiatives or the government’s Home Affordable Foreclosure Alternative program. Chase and Wells Fargo were two lenders mentioned in the Sun Sentinel story, but they were intentionally vague about who qualifies for the money and why. My experience tells me that eligibility for these programs is rare, but it never hurts to try.

In some cases, you must contact your lender and ask for the money before you have a buyer in place. This is quite different from how a normal short sale works in which it’s a waste of time to contact your bank before you have a bona fide contract to sell the property. Typical incentives given by the bank are relocation assistance from $3,000 to $20,000 and a waiver of the deficiency between what your home is worth and what you owe your lender.

These programs are limited in scope, often limited by the location of the property and by who owns the loan. For example, properties in Florida are generally eligible, but loans insured by government entities – such as the Department of Housing and Urban Development, the Federal Housing Administration or the Department of Veterans Affairs – often are ineligible. If your loan is not eligible, it may very well still be approved in a “traditional” short sale.