By Les Christie CNNMoney
NEW YORK (CNN Money) — Bank of America is offering some struggling homeowners payments of up to $30,000 if they sell their homes in a short sale and avoid ending up in foreclosure. Under the plan, Bank of America will offer homeowners so-called relocation payments of between $2,500 and $30,000 if they sell their home in a short sale. In short sale deals, the sale price of the home is less than what the seller owes the bank. The bank first tested the payments in a pilot program in Florida last fall. Under that initiative, Bank of America paid up to $20,000 to borrowers who sold their homes in short sales.
“This program can help customers make a planned transition from ownership when home retention options have been exhausted or they have made a decision not to keep the home,” said Bob Hora, an executive for the bank.
JPMorgan Chase started a similar initiative in late 2010 that pays as much as $35,000 to short sellers. Wells Fargo has also paid five-figure incentives to short sellers or to owners who turned over their deeds to the bank. [Almost all banks have some form of cash incentive program at this time.]
BofA said it has completed 200,000 short sales over the past two years. These sales are generally more cost effective for banks than foreclosures. By avoiding foreclosure, the lenders get distressed properties back from delinquent borrowers more quickly, which helps them to avoid property tax payments, maintenance expenses and legal fees that can build up for months, even years, as foreclosures work through the system.
To qualify for relocation payments the short sale must begin by the end of 2012 and close by September 26, 2013. The exact compensation is determined case-by-case based on a calculation that involves the home’s value, mortgage balance and other factors.