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There’s a lot of news coverage this week about the announcement by Bank of America that it is introducing a new short sale program to help Florida homeowners in trouble with their mortgages.  Across the country and in Florida, Bank of America itself (BofA) is putting money on the table to help homeowners and encourage them to short sale their home.

How much money and what’s the money for?  Bank of America is promising to put down anywhere from $2,500 to $30,000 as cash on the barrel-head to help the seller in the short sale to relocate.  The pilot program began here in Florida, now it goes nationwide.

Short sales are very, very good alternatives to the foreclosure process here in Florida, as we have been discussing here for awhile now.  Problem was in the past that lenders weren’t that cooperative or that fast in helping short sales succeed for distressed homeowners trying to get out from under their mortgage.  Lenders took their time okaying the short sale terms, if they ever did.  Antsy buyers sometimes walked away.  Wary buyers just avoided the short sale properties in the first place, knowing the reputation they had for taking months and months to get finalized and the complications of having the lending institution involved.

So, it’s big news to have Bank of America actively encouraging – even helping – the success of short sales of residential home properties here in Florida and elsewhere in the country.

Details of the New Bank of America Short Sale Program

To qualify for the new program, short sale offers on homes with mortgages owned and serviced by Bank of America itself have to be submitted to BofA between now and September 26, 2013, and the bank needs to okay the sales price before the short sale is put out there in the marketplace.  If the bank hasn’t okayed the sale price before you’ve got an offer on the table, then you’ve got a problem with qualifying for this new program.

How much will you get in this new program for relocation expense after you’ve been qualified?  BofA doesn’t have a set schedule; instead, it’s going to be decided on a “case by case” basis.  (Translation: get ready to negotiate that number).

Larry Tolchinsky’s Tip:

Last year, Bank of America tested the waters here in Florida with a similar plan that was offered for around sixty days last Fall.  From that approximately sixty-day period, it’s reported that 11,000 Floridians with Bank of America mortgages agreed to short sales by August 2012 but only 847 of those houses have actually sold.  From those 847 deals, it’s reported that BofA paid an average of $12,000 in relocation expense.

If this sounds like the Home Affordable Foreclosure Alternatives (HAFA) program offered by the federal government, it should.  HAFA also offers relocation cash, just not as much (estimated offer is around $3000 under HAFA).   BofA is offering a similar deal to its own distressed homeowners who may otherwise end up as defendants in foreclosure actions filed by BofA – which is the incentive for the lender to go ahead and make these kind of cash incentive offers.

What about the deficiency?

However, it would be prudent for Florida homeowners with Bank of America mortgages to move carefully.  The “case by case” basis in determining the amount of relocation expense that will be available to them is an issue to be considered: what are the criteria here, and is there wiggle-room in negotiations?

Another big question (and this is a BIG question): what about the deficiency judgment?

It’s nice that the lender is offering to help with relocation costs, but one has to wonder about their plans to deal with the deficiency that will result from the short sale.  It’s not much of a bargain to get relocation expenses now, and then have to pay thousands in a deficiency judgment for years down the road.

Which boils down to a recurring theme here:  now is not the time to negotiate anything with a sophisticated lender (or anyone else) when the transaction involves Florida real estate.  Things are just in too much of a mess.  With these short sale programs, there is the nuance that the homeowner can work with the friendly bank to get things done, the stressful situation resolved, and everyone moving on down the road.

That’s not the reality of today’s Florida real estate market.  This relocation expense offer is nice, but it’s just part of a negotiation that needs to take place with experienced legal advocates at the table.  Maybe that’s why the numbers are not higher in the Florida pilot program – when it got down to brass tacks, this wasn’t such a bargain?

For more on short sales, check out:

  1. 10 Things to Know About Mortgage Debt Collectors and Florida Short Sales, Florida Foreclosures, and Florida Home Loan Modifications
  2. Five Things To Know About The Income Tax Break For Short Sales, Foreclosures, and Loan Modifications That Ends December 2012
  3. The Short Sale Transaction in Florida: Things That the Seller (and Buyer) Need to Know Before Closing the Short Sale of a Florida Home – Clouds on Title

For more on deficiency judgments, read:

  1. Future of Florida Deficiency Judgments on Florida Home Mortgages – Will New Laws Limit or End Bank’s Ability to Sue for Unpaid Mortgage Balance?
  2. Florida Deficiency Lawsuits Against Florida Homeowners Who Walked Away From Their Mortgages: Are You About to be Sued for the Deficiency Balance Left on Your Florida Mortgage? (Answer Likely is Yes)

If you have questions or comments, please feel free to Chat with Larry in the comments below, at or (954) 458-8655.

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