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Incentive Payments for Short Sales?? – Reprint from Lowell Sun 3/10/12

Saturday’s Lowell Sun article ( by Attorney James Haroutunian tells us about possible changes on how the banks handle short sales and their clients.

Incentive payments becoming part of some short-sale deals


Last week I discovered the holy grail in the world of short sales: My office performed a short-sale closing where the lender paid a $20,000 incentive payment to the seller. That’s right, the seller got out from her loan and got paid for it at the same time.

Industry rumors rang in the new year, as lenders indicated 2012 would be a big year for short sales. High foreclosure volume in hard-hit states such as Florida motivate lenders to use the collaborative process as an alternative to legal action. Some lenders claimed to begin using incentive payments in 2011, though infrequently.

Last week, I bore witness to this phenomenon, as a very happy seller walked away from her mortgage with $20,000 cash. The lender further agreed to waive any deficiency obligation by the seller.

Will this become the norm with short sales? Local real-estate agents are hopeful incentive payments will continue because they will help clear housing inventory. But they remain skeptical it will actually happen.

USA Today reports the following major lenders providing certain programs:

* JPMorgan Chase went national with short-sale incentive offers last year, paying up to $35,000 in some cases.

* Bank of America is testing incentives from $5,000 to $25,000 in Florida to see if it should be expanded to more states.

* Wells Fargo’s incentive offers range from less than $3,000 to $20,000, according to a company spokesman.

James Haroutunian Law Office at 630 Boston Road, Billerica, 978-671-0711 or email at


Buyers Denied Loan, But Still Lose Deposit – A Reprint

The following is a reprint of James Haroutunian’s column that appeared in the Lowell Sun on February 11, 2012

A fellow real-estate lawyer who write the brings attention to a recent appeals-court case that cost a couple their $31,000 deposit.  This case highlights the importance of proper contingency language in purchase-and-sale contracts.

These unfortunate buyers started off like everyone else.  Armed with a pre-approval letter, the buyers’ P&S contract contained a standard mortgage contingency.  It offered a refund of the deposit if the buyers were unable to get a mortgage loan.  A deadline was set and the buyers worked diligently with their lender to get a loan commitment.

These buyers were unique because they did not intend to sell their current home – essentially buying a second home.  When the lender analyzed the buyers debt-to-income ratios, it was determined they could not afford to carry both mortgage payments.

As a result, the lender required the buyers to “list their home for sale.”  When the buyers refused, the lender denied the loan.  Timely notice of the denial was provided, but the sellers refused to release the deposit.  The court determined the buyer’s refusal to list their current home for sale was unreasonable, and in violation of the “prevailing terms and conditions” portion of the mortgage-contingency clause.

Here the court found the lender’s condition reasonable, and the buyers’ refusal to list their home for sale unreasonable.  Thus the buyers LOST their $31,000 deposit.

Sadly, if the issue were addressed upfront, simple language could have been added.  Stating that financing would not be conditional on the buyers’ listing or selling their current home may have lowered the “prevailing conditions” standard enough to save the buyers’ deposit

Attorney James Haroutunian practices real-estate law, estate planning and probate at 630 Boston Road, Billerica.  He invites questions at or by phone at 978-671-0711.  His blog is found at


Short Sale Shows Slice of Life – Reprint from Billerica Atty James Haroutunian Blog

This was originally posted on August 2, 2011.  However with all the short sales currently on the market and the potential for more over the next few years, the information bears repeating:

While government officials take their political standoff to the streets, seeking to affect public opinion and gain sympathy, a quiet example of real economic struggle occurred in my office.  The tale spans six years and aptly summarizes the fallout and effect of america’s economic woes.

In 2005, a young family sought my help with their purchase of a home in Billerica.  Gleeful to move their family to the suburbs, the couple paid top dollar at the height of the real estate market.   Their first and second mortgage carried temporarily fixed rates.  The couple, assumed they would simply refinance when the rate changed in a few years.  After the market crash of 2007, this was no longer an option.

To keep up with payments, each spouse took multiple jobs.  This worked for a couple of years.  Financial stress ultimately took a toll on the couple, leading to separation.  The couple moved out of the home, leaving it in disrepair, while the banks began foreclosure.  As a last alternative, the broken family turned to a Realtor to help with a short sale.  By avoiding foreclosure, a short sale would minimize credit damage.

The realtor struck a deal with a new young couple, eager to rehab the house.  Aggressive negotiation ensued with both banks, until they reduced the amount of their debt.  This took months of hard work, during which the dilapidated house caught the eye of the local Board of Health.  The Realtor valiantly absorbed threats from local officials and ire from neighbors.

Further calamity struck, when pipes froze and burst in the house, causing major damage.  The Realtor literally and figuratively bailed out the property by negotiating a major price reduction.  After seven months of struggle, the house finally sold.  The former owners now close the curtain on six tumultuous years, starting their lives over separately.

Meanwhile, a new young couple enters the home to improve the neighborhood blight left in the resulting wake.  As I write this column, a dumpster is being dropped at the property to begin the clean out.

What awaits this new couple?  Will their next six years offer greater opportunity without being saddled by high housing costs?  The house remains the same, but will the story change in a more optimistic economy?

Attorney James Haroutunian practices real estate estate planning and probate law in Billerica at 630 Boston Road.  Contact him with questions at, 978-671-0711 or email him at

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