Cash for Keys for Homeowners in Foreclosure
Banks sometimes offer cash to homeowners in foreclosure
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:
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. Often, it's a few thousand. 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.
- Rental truck
- Utility deposits
- Temporary living quarters such as a motel
Sometimes banks pay bonuses when occupants agree to move out immediately. It all depends on the bank and its willingness to work with an occupant. It is not required to give anybody cash for keys, though.
Do not ask the bank for more cash than you need to relocate; this could backfire, and the offer might be withdrawn.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 might 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 used to be the short sale bank would pay the tenant up to $3,000 in relocation assistance to cooperate with the short sale. HAFA short sales did 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.
However, the bad news is HAFA expired December 31, 2016, as of publication.
Do Occupants Always Get Cash for Keys?
More bad news is there are fewer and fewer short sales as the years go on. Foreclosures will probably never go away as there are always people who either wittingly or unwittingly find themselves in financial woes.
They lose a job, experience a medical condition they can't afford to improve or worse. Some people lose their homes due to addiction issues or through divorcing.
As long as there are foreclosures, people will continue to find themselves financially strapped and unable to meet their obligations. When that happens, and people have no financial means to leave the premises and move elsewhere, that's when the banks often step in and offer cash as an incentive to leave the home.
Banks are not required to offer an occupant any money at all. Be pleasantly grateful if they do.
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.