Bank of America, the largest lender in the U.S., has launched a plan to pay borrowers up to $30,000 if they cannot make their mortgage payments and now face foreclosure.
Q. I bought my home two years ago with a loan from Bank of America, but now it's worth about $20,000 less than I paid for it and I am struggling to make the monthly payments because I lost my job in January. The bank has sent me a default notice and is threatening to foreclose, but the letter also says I have the option to make a "short-sale" that will allow me to avoid foreclosure, wipe out all my mortgage debt and will actually pay me $5,000 to leave. Is this offer legitimate?
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A. Probably, assuming that it came directly from the bank rather than a third-party "foreclosure specialist" or a scamster.
Bank of America is the nation's largest mortgage lender. In mid-May, it introduced a program that offers its financially troubled homeowners with "relocation payments "of between $2,500 and $30,000 if they sell their home in a short sale.
In a short-sale deal, a bank agrees to accept less than is owed on the property if the borrower voluntarily sells and moves out. It saves the homeowner the nasty stain on a credit record that a foreclosure can leave, while also saving the bank the thousands of dollars that it would take to go to court and have the borrower forcibly removed.
To qualify for Bank of America's new relocation-payment plan, its borrowers must first obtain preapproval on the proposed sale price of their home. The sale must begin by the end of this year and close by Sept. 26, 2013.
The exact compensation paid to BofA's borrowers is determined on a case-by-case basis. Factors include the home's value, the borrower's payment record and the size of the loan's outstanding balance.
Customers of BofA can call the lender at (877) 459-2852 to find out if they are eligible for the program, or visit www.bofa.com. Several other banks are expected to launch similar plans in the months ahead.
Q. I am a longtime reader of your column, and am especially appreciative when you write about various pet-related real estate issues. I am hoping that you will tell your readers how my terrier, Billy, died three weeks ago in my laundry area because he ate my nylons. Our veterinarian told us that this happens all the time!
A. I'm sorry for your loss, but am happy to pass along your warning to other homeowners in the hope that their own pets won't suffer the same fate.
More than 2 million dogs, cats and other pets get sick or even die each year in their owner's home or yard after ingesting stuff that could be easily picked up. The most common threat is a stray sock, according to Veterinary Pet Insurance Co., a firm that issues policies to pet owners to help pay the bills if their four-legged friends become ill or are injured.
The dangers posed by a simple cotton or nylon sock are followed, in order, by underwear, pantyhose, rocks and small toy balls. Then come common chew toys, corn cobs, bones, hair ribbons and plain ol' sticks.
Q. How many houses should a buyer look at before making an offer?
A. There's no cut-and-dried response to your question.
Some buyers make an offer after falling in love with the first home that they see. But that's usually a bad idea: Most 30-year mortgages last longer than a typical marriage, so it's better to "shop around" a little before making a proposition.
On the other hand, I've met folks who visited 30, 40 or even more than 50 homes without ever submitting a purchase offer. If you get to that point, you're probably being unrealistic about your expectations or simply aren't ready to commit to the responsibilities of homeownership.
For the record, though, a recent study by the National Association of Realtors found that prospective buyers spend an average of 12 weeks looking for a home and also view 12 properties before making an offer -- not including the houses and condos that they "tour" on the Internet.
Q. If we create a money-saving trust like the one you wrote about a few weeks ago, would we also lose the Internal Revenue Service tax benefits that would let us keep $500,000 in profit from our eventual home sale?
A. No. Creating an inexpensive trust would have little or no impact on your personal tax situation. You could place your home into the trust to ensure that your heirs would quickly get the property after you pass away, without the time or cost of going to probate court, but you would still have the right to sell it and keep up to $500,000 of the profit tax-free if you and your spouse sold it before you die.
• For the booklet "Straight Talk About Living Trusts," send $4 and a self-addressed, stamped envelope to David Myers, P.O. Box 4405, Culver City, CA 90231-4405.
© 2012, Cowles Syndicate Inc.