New York (CNN Money) – Bank of America (BofA) is offering some struggling homeowners payments of up to $30,000 if they sell their home in a short sale and avoid ending up in foreclosure.
Under the plan BofA will offer homeowners so-called relocation payments of between $2,500 and $30,000 if they sell their home in a short sale. In a short sales the price of the home is less than what the seller owes the bank.
The bank first tested the payments in a pilot program in Florida last fall. Under that initiative BofA paid up to $20,000 to borrowers who sold their house in short sales.
“This program can help customers make a planned from ownership when home retention options have been exhausted or they have made the decision not to keep the home,” said Bob Hora, an executive for the bank.
Short Sales make up 1-in-4 homes sold
Chase started as similar initiative in late 2010 that pays as much as $35,000 to short sellers.  Wells Fargo has also paid five figure sums to short-sellers or to owners who turned over their deed to the bank (known as “deed in lieu of foreclosure”)
BofA said it has completed 200,000 short sales over the past two years.  Those sales are generally more cost effective for the banks than foreclosures.  By avoiding foreclosures the banks get distressed properties back from delinquent borrowers more quickly which helps them reduce property tax payments, maintenance expenses and legal fees than can build up for months or even years, as foreclosures work through the system.
In addition, the incentives help ensure the home will return to the lenders in better condition. Foreclosed properties are often poorly maintained, even, sometimes sabotaged, by angry former owners making them worth far less.
During the last three months of 2011, nationwide foreclosures sold for an average of $150,000 according to Realtytrac, while short sales sold for an average of $185,000 (around 23% higher).
To qualify borrowers must obtain pre-approval on sale prices for their homes.  The sale must begin by the end of 2012 and close by September 26, 2013.  The exact compensation is determined on a case-by-case basis depending on the home’s value, mortgage balance and other factors.