Short sales may become easier to get

People have been complaining that they found a buyer for their house but it's taking months to get approval for a short sale. Well, you may find it easier to get your bank's approval thanks to a new incentive program announced Thursday by the Obama Administration.

Treasury Secretary Timothy Geithner said that the Making Home Affordable program will add an incentive for banks that agree to a short sale or deed in lieu of foreclosure. The bank will get a $1,000 incentive and upon successful completion of the process a homeowner who is losing their home will get $1,500 for relocation expenses.

In announcing the program Geithner said in a press release, "Today we are announcing a new program component to help homeowners obtain modifications in areas suffering from home price declines. If a modification is not possible, we are also announcing steps to encourage the quick private sale or voluntary transfer of property, which will save homeowners money and protect their financial future. These are critical steps in stemming the foreclosure crisis and stabilizing the housing market, both of which are critical to our economic recovery."A short sale involves the sale of a home for less than the current value of the mortgage. The bank agrees to take less to avoid the costs of a foreclosure. The foreclosure process costs a bank an average of about $50,000 plus it usually must take the same loss upon sale of that foreclosure property and possibly even a greater loss.

A deed in lieu of foreclosure involves a property owner signing over the deed and agreeing to give up the home. The lender can save about $50,000 by not having to go through the foreclosure process.

If you are considering either a short sale or a deed in lieu of foreclosure, I highly recommend that you work with an attorney that can protect your rights. One major thing that can be negotiated is how this agreement will impact your credit report. An attorney may be able to negotiate a credit reporting agreement be sure you credit score won't take a big hit.

Lita Epstein has written more than 25 books including "The 250 Questions You Should Ask to Avoid Foreclosures."