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Hello there,
On a FHA short sale, the investor (HUD) will often offer a seller incentive if the seller closes within a certain amount of time. That amount ($1,000) is reduce to $750 if the seller doesn't close within that time and passes the deadline. The way it has to be structured on the HUD in order to be allowable per FHA guidelines: Line 603 should reflect "$0" and line 506 should say "FHA Seller Incentive- $1000". Beware though- this changes the net to lender by $1000 less. So, if you are close to the net minimum required, throwing the $1000 incentive in there may result in a need to increase the purchase price (which will result in needing a new approval). The $1000 is paid directly to your seller at time of closing by the title company/closing attorney. Good luck! PS That $1000 can also be used to cover "non-allowable" expenses such as seller paid home warranty, mechanic liens, etc.
It is part of the Pre-Foreclosure Sale Program ("PFS") and it has been around since 1994. HUD/FHA will pay the seller an incentive to successfuly short sale their home (within 120 days) of approval to the PFS program. This is free money for your seller, however if their are junior liens or HOA liens, HUD will use the incentive money to pay these junior liens.
FHA short sales are the best!
The incentive was built into the sale, and reflected on the HUD as "seller credit", however, my clients weren't walking away with a $1,000 from the closing. So, before I told them they were getting money back, I wanted to make sure that they were. The closing was last Friday, and as it turns out, they will get a check in the mail from HUD in the next few weeks, which was a great surprise for them.
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