Cash for Keys for Homeowners in Foreclosure

Banks sometimes offer cash to homeowners in foreclosure

Keys on top of one hundred dollar bill
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Cash for keys is not the answer to every homeowner's woes, but it is certainly welcome for some. After all, two of the biggest problems banks face when taking back a home in foreclosure are the condition of the home and getting rid of its occupants. This is why cash for keys is a quick and easy solution for many banks. Cash for keys is a term that was kept under wraps by the banks for years, but the subprime mortgage meltdown of 2007 -- which led to large numbers of foreclosures -- forced many banks to initiate a cash for keys policy as standard procedure.

What Is Cash For Keys?

Cash for keys is a way for homeowners in foreclosure -- or tenants living in foreclosed homes -- to receive cash in exchange for surrendering the keys and vacating the property. A bank generally reaches an agreement with the occupants of a foreclosed home, which requires the home to be cleaned and left in good condition. The agreement typically sets forth a specific date that the home will be vacated, including a promise from the occupants that they will not:

  • Vandalize the home.
  • Strip the home of light fixtures, appliances or copper.
  • Leave pets behind.

Why Banks Pay Cash for Keys

Banks are not in the business of owning properties, but once a bank gets the title to a home through foreclosure proceedings, it is responsible for it until it sells. If the bank has to spend money to repair damage caused by the occupants, that money increases the bank's loss. It can also cost thousands of dollars to evict a homeowner or tenant and can be time-consuming to go to court.

How Much Do Banks Pay?

The sum is negotiable. Banks do not automatically offer cash for keys; the occupant usually brings up the subject. To move out, these are reasonable expenses you may expect to recover:

  • A security deposit at another location, plus the first and last month's rent.
  • Movers
  • Rental truck
  • Utility deposits
  • Temporary living quarters such as a motel

Sometimes banks pay bonuses when occupants agree to move out immediately.

Do not ask the bank for more cash than you need to relocate; this could backfire, and the offer might be withdrawn. Be pleasant, courteous and reasonable, and you could get the cash you need to leave the premises.

Cash for Keys During a Short Sale

A benefit of a HAFA short sale for tenant-occupied properties is the short sale bank pays the tenant up to $3,000 in relocation assistance to cooperate with the short sale. HAFA short sales do not pay owner-landlords who do not live in the homes a relocation fee. In exchange the tenant agrees to allow the property to be shown and leave the home in good condition. At closing, the tenant receives a check.

Ask your listing agent if your short sale qualifies for HAFA benefits. HAFA expires December 31, 2016, as of publication.

At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.