Is That $30,000 Incentive to do a Short Sale for Real?

A number of short sale clients have shown me letters, mostly from Chase, offering them an almost incomprehensible amount of money if they’ll do a short sale. It would seem hard to believe, in a world where short sale sellers typically walk from closing with the clothes on their back and no proceeds, that lenders would suddenly offer them tens of thousands of dollars to sell for less than what they owed the bank. But there, in real living color, I have been shown these letters, right at the kitchen table, with numbers to call for verification and everything.

We’ve looked into it. The ones from JPMorgan Chase are legitimate. In some cases, Chase is giving a $30,000 incentive to underwater borrowers to complete a short sale. I have verified it through attorneys, Chase, and several Chase officials, and the explanation has been the same: Chase wants to close out these assets and they’d prefer not to foreclose. In the cases I have seen, the loans were originally Washington Mutual mortgages acquired by Chase when they absorbed WaMu in 2008. Chase paid $1.9 billion for Washington Mutual’s assets in 2008 after they were shut down by the FDIC. They did not pay face value for these mortgages. They can afford to sell them at a loss and even pay an incentive to the borrower and still remain in the black- and safely distant from the robo-signing scandal headaches.

According to a senior VP at Chase I have known for many years, other banks are doing similar incentives. Wells Fargo bought Wachovia. Bank of America bought Countrywide. And they can, in house, offer a far better cash incentive in many cases than what sellers could get under the HAFA incentive of $3,000, which many people often do not even qualify for. Not only that, under the TARP rules, the banks can claim a loss on the face value of the loan on their taxes. And that appears to be what they are doing.

Not every letter a delinquent homeowner gets in the mail promising them cash, incentives, and other goodies is legit. As a matter of fact, much of the mail I have been shown by delinquent homeowners struck me as a scam. But I have to say, in the case of banks like Chase, those large incentives to complete a short sale are a fact.

WHATEVER you do, however, never do it alone. If you are in New York or Connecticut where I work, contact a lawyer and check everything out before you ever deal with the bank directly alone and without help. We have a team including lawyers and a CPA who can make sure that our clients make all the right moves and have their backsides covered. Forewarned is fore armed.