Some lenders are reaching out to borrowers with incentives in order to encourage them to complete a short sale. For example, Chase is offering sellers between $20,000 and $35,000 at closing (yes, this is true!). The HAFA Program allows qualified sellers who participate in the program to receive up to $3,000 at closing. Wachovia and Litton solicit borrowers through letters, which allow sellers to receive up to $5,000 at closing. At this juncture, we have no reason to doubt that some, if not all of these programs are indeed quite legitimate. In fact, we have assisted borrowers in successfully completing many of these programs.
However, with these incentives come questions, and some degree of caution should be exercised. Are there hidden requirements? Are there adverse tax implications? Has the lender explained all of the details of their respective programs to the borrower? Will the deficiency be clearly waived at closing?
These questions can be difficult to answer unless some analysis is done of the borrower’s specific circumstances and the specific proposal made by the lender. As such, it is Berlin Patten’s opinion that if the borrower is asked to participate in one of these programs, that the borrower should review the terms of the incentive program with a real estate attorney and discuss the tax implications with a tax attorney prior to participating in any such program.