Homeowners: Selling Your Home? Get Relocation Assistance

Have you tried to sell your home recently?  Is it difficult to sell because you owe more than it’s currently worth?  Well, good news.  The Obama administration recently began a new program to help homeowners like you.  This new program involves paying homeowners to move out of their homes.  Here’s how it works.

How Short Sales Used to Work

Traditionally, short sales are infamous for taking a long time for bank approval.  If you’re unclear as to how a short sale works, it goes like this.  Homeowners price their home with current market values, and once they have a buyer, they submit that price to the bank for an approval.  This is for homes that owe more than the home is worth, which is why the sale will still not cover the full amount owed to the bank.

The bank then has to decide whether or not the sales price is reasonable, and if they agree to take the loss or difference after the sale.  If the bank agrees, it’s a short sale because the homeowner walks away from the house even though they are short on the loan amount.

There are varying cases depending on your situation of course, and in some instances the owner still has to pay the bank a portion of the difference.  This is often a better option for both the bank and homeowner because the homeowner doesn’t have a foreclosure on their record, and the bank doesn’t have to try and sell it after they foreclose.  The downside to this process is that it takes a long time usually, and that buyers lose interest.

The process takes awhile because there are so many parties.  There’s the homeowner, the lender who services the loan, the investor who actually owns the loan, and another bank if there’s a second mortgage on the property.

How Short Sales Work Under Obama’s New Program

This is where the new program comes in.  Beginning April 5th, the servicing bank will get $1,000, the second bank (if there is one) will get another $1,000, and the homeowners will receive $1,500 in “relocation assistance.”  The money is an incentive for all parties to come together, and get the house sold with the least damage possible.

Ideally, this plan is good for the banks because short sale homes bring in more money than foreclosed homes.  Borrowers also benefit from this plan because it allows homeowners to walk away from a home without damaging their credit as much as a foreclosure would, and they are also guaranteed that the lender will not require they pay the remainder of the mortgage.

Neighborhoods will benefit because empty homes will not sit for a period of months waiting to be sold, which depreciates property values, and the number of foreclosures will lessen.  So if you’re in the market to sell, and you owe more than what you can sell the home for, this could be one option for you and your family.  For the full story, be sure to check out this New York Times article.

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