$2,500 Incentive Will Spur Short Sales, Says John Burns
A Treasury Department spokeswoman confirmed an incentive program for servicers that pursue short sales is on its way, according to John Burns Real Estate Consulting.
The subsidy program will provide $1,000 to the servicer and $1,500 to the seller in each short sale transaction for a total incentive of $2,500 per short sale, the spokesperson told the consulting firm. This strategy should help "clear excess inventory," according to market commentary by John Burns Real Estate.
"The fees are designed to help compensate the servicer for the extra effort, and to incent the seller to be cooperative and leave the home in good condition," the firm said. "Presumably, the Treasury is trying to help facilitate a transaction that will result in less loss to the lender than in the case of a foreclosure."
Short sales historically see low levels of interest, the consulting firm noted, high-ligting banks' reluctance to approve bids below the appraisal on file. John Burns Real Estate also pointed out the extra work on the part of realtors and the extra time -- up to four or five months -- on the part of buyers involved in a short sale.
But short sales should pick up in volume if the Treasury offers incentives that would encourage banks and realtors to work together on finding the best solution. But John Burns Real Estate said it remains "skeptical" that the incentive program will change an overall bad reputation arising from limited success for interested buyers.
A source familiar with the plans told HousingWire in September the Treasury expected to issue details on an incentive program for both short sales and deeds-in-lieu of foreclosure later in the month. The source confirmed Friday the details should be available in coming days.
Write to Diana Golobay.
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