Bank of America is offering up to $20,000 to select Florida homeowners willing to agree to a short sale instead of entering foreclosure.
To sweeten the deal further, the nation's largest lender will consider waiving the deficiency on the loan, which allows homeowners to sell the house for less then they owe without having to make up the difference to the bank. It can save homeowners thousands of dollars.
Not every Bank of America customer in Florida will be eligible for the program, which pays a minimum cash incentive of $5,000. It's targeted toward homeowners who cannot afford their mortgages.
To quality, the short sales must be submitted for bank approval by Nov. 30 and must close by Aug. 31. Sales already under contract are not eligible; neither are properties outside of Florida.
This is a "test-and-learn" program being rolled out only in Florida because of the higher foreclosure rates than other parts of the country, said Christina Beyer Toth, a Tampa-based spokeswoman.
Florida is seen as a viable market to gauge short-sale response when presenting homeowners with relocation assistance, she said. If successful, the plan could expand to other states.
The bank notified select Florida real estate agents this week about the offer.
"It will get a lot of people off the fence about wanting to sell their home," said Steve Capen of Keller Williams Realty in St. Petersburg. "This makes sense."
What's in it for Bank of America? It saves attorney fees, court costs and property taxes by avoiding foreclosure. It also speeds the process of getting bad loans off its books and gets the properties back on the market faster.
Capen, who specializes in short sales, plans to heavily market the offer to clients. But he cautioned that homeowners shouldn't get overly excited because many of these plans have restrictions.
"It will only help a fraction of the people," he said.
Homeowners get the cash after the short-sale deal closes. A caveat: Homeowners might have to pay income taxes related to the deficiency waiver and the cash payout.
The cash payouts give homeowners a reason not to trash their homes or strip them bare before moving out. When houses enter foreclosure, homeowners can essentially live for free until banks take possession at the end of the court process, which takes an average of nearly two years in Florida.
Attorney Chris Boss of Yesner & Boss said the deficiency waiver will enable homeowners to buy a house without filing bankruptcy or waiting three years from when foreclosures become final.
"It's a chance to get away from the house with some money in your pocket," Boss said. "This is good for the economy."
Other national lenders started similar programs.
Late last year, JPMorgan Chase began giving homeowners $10,000 to $20,000 and waived losses on the mortgage. The bank still suffers a loss in the process, but generally speaking, sale prices on short-sale homes are higher than foreclosed homes.
Real estate experts and economists have said the housing market cannot fully recover until the millions of distressed mortgages are removed from the system.
Mark Puente can be reached at firstname.lastname@example.org or (727) 893-8459. Follow him at Twitter at twitter.com/markpuente.