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's certainly a welcome option for some. 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. Cash for keys is a quick and easy solution for many banks.
The term is one that was kept under wraps by the banks for years, but then the subprime mortgage meltdown of 2007 led to large numbers of foreclosures. It forced many banks to initiate a cash for keys policy as standard procedure.
What Is Cash for Keys?
Cash for keys provides homeowners in foreclosure and tenants living in foreclosed homes with cash in exchange for doing what they'd eventually have to do anyway—surrender the keys and vacate the property. The bank reaches an agreement with the occupants of a foreclosed home that the home will be cleaned and left in good condition.
The agreement typically sets a specific date by which the home will be vacated, including a promise from the occupants that they won't vandalize the property or strip the home of light fixtures, appliances, or copper. The occupants must promise not to leave any pets behind.
Why Banks Pay Cash for Keys
Banks are not in the business of owning properties but they're responsible for the properties they must foreclose on until they're able to sell them. It increases the bank's loss if it has to spend money to repair damage caused by the occupants. It can also be very time consuming and cost thousands of dollars to evict a homeowner or tenant in court.
How Much Do Banks Pay?
Banks don't automatically offer cash for keys—the occupant usually brings up the possibility. The sum is usually negotiable. Often, it's a few thousand dollars intended to recover reasonable expenses involved with moving out. These might include a security deposit at another location plus the first and last month's rent, as well as utility deposits or temporary living quarters, such as a motel. It generally includes movers and rental trucks as well.
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. Banks aren't required to give anybody cash for keys.
Don't 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 This could backfire and the offer might be withdrawn.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 that the short sale bank would pay the tenant up to $3,000 in relocation assistance to cooperate with the short sale. HAFA short sales didn't pay relocation fees to owner-landlords who didn't live in the homes. In exchange, the tenant would agree to allow the property to be shown and leave the home in good condition.
At closing, the tenant would receive a check. The bad news is that HAFA expired on December 31, 2016.
There are fewer and fewer short sales these days, although foreclosures will probably never go away. There are always people who find themselves in financial trouble. They'll 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 divorce.
When that happens and they have no financial means to leave the premises and move elsewhere, 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, so 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.