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Cash for Keys and Foreclosure

I do not understand how cash for keys works. Can you explain cash for keys for me?

What is Fannie Mae's "Cash for Keys?" A lady at our church asked me about it and I have NO idea. Can you help me??

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Updated: Oct 23, 2014

Foreclosure
Highlights

  • Learn about cash for keys.
  • Protect yourself and get the most money in a cash for keys negotiation.
  • Know your rights, when a home you own or rent goes through foreclosure

Cash for keys is a concept for homeowners whose home went into or for people who are renters in a property that went into foreclosure. Cash for keys is voluntary, and there are no hard-and-fast rules mortgage servicers or land owners must follow. Cash for keys in not a law. Each mortgage servicer is free to offer it (or not) on a state by state basis, and set their own qualification criteria.

What the Bank Gains from Cash For Keys

Cash for keys can also be called relocation assistance. Cash for keys is when a homeowner or tenant is offered money as an inducement to vacate the foreclosed property in a speedy manner and to leave the property broom clean and undamaged. The bank is eager to get the property back on the market as soon as possible. It is likely that there have been had no payments made on it for an extended time, so the bank is willing to pay a fee to expedite the process, to reduce its losses.

Sometimes, in foreclosed homes, the vacating party is so angry that he chooses to strip out appliances and fixtures, to stop maintaining the home, or to even actively trash the home. Cash for keys is designed to avoid this from happening. It involves a written agreement between the bank and the owner/tenant that specifies the amount that will be paid to the vacating party as well as the timeframe for vacating the property and the binding commitment for the vacating party to leave the property in excellent shape.

Usually, the bank hires a third party, such as a real estate agent, to work the cash for keys process. While the final decision of how much to pay the vacating party rests with the bank, the agent will be someone with whom the vacating party can try to negotiate, regarding the size of the cash for keys payment and when the property needs to be vacated. In general, the faster the property is vacated, the higher the cash for keys payment.

The Rights of the Tenant or Homeowner

It is very important for the homeowner/tenant to know his rights. Once a property is foreclosed, it belongs to the bank. A federal law, the , requires that the tenant in a foreclosed property be given at least 90 days, before being forced to vacate. Under the new federal law, your lease is good after foreclosure. You are entitled to stay in your apartment for the full term of the lease. The only exception to this rule is if the new owner wants to live in your apartment, in which case you are still entitled to 90 days before you can be forced to move.

Each state legislature created unique and laws. Follow the links just mentioned to learn the foreclosure rules relevant to you.

Eviction

Different states and localities have differing regulations for how long a person can remain in a property and it may require an eviction to force the resident to vacate. Eviction is not an immediate process, taking at least 90 days. Depending on how long a person legally can stay in a home, before being forced to vacate, that person may gain greater benefit by continuing to stay in the property, when compared to accepting a low-dollar cash for keys offer. The longer a person is legally allowed to remain in the property, the stronger his negotiating position and the more money he should be able to get in the cash for keys agreement. It makes good sense for a person in this situation to know how long the he is legally allowed to remain in the home, doing the necessary research with state and local housing rights authorities.

No one is required to accept the cash for keys offer. The homeowner/tenant should be treated respectfully by the bank’s agent. A person does not have to put up with threats or abuse. The nastier the agent becomes, the likelier the agent is trying to bully someone into a less than favorable deal.

It makes sense for the homeowner/tenant to calculate the costs of moving and relocating, with the goal of negotiating the cash for keys agreement that will cover these expenses. For renters, it is important to cover the topic of the security deposit in any negotiation, or the renters can find that no security deposit is received and there is little or no recourse to recover it. Most agreements require the renters to agree that all future claims are dropped, though some states require the new landlord to honor your security deposit.

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Broom Clean

Cash for keys offers can range from $500 to $5,000. Before the money is disbursed to the homeowner/tenant, the agent will come to inspect the property, making sure that is thoroughly cleaned and the property is undamaged. The term that is often used is "broom clean." Broom clean means that the property should be emptied of all personal property, the floors have been swept, the appliances have been cleaned, and any changes that have been made, such as nails in the walls or painting a room, have been returned to their previous condition.

If negotiated properly and a person knows his rights, so he can best protect himself, cash for keys can be a win-win situation for both the bank and the resident.

I hope this information helps you Find. Learn & Save.

Best,

Bill

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  • NP
    Jul, 2014
    nicholas
    We were renting from a person who did not tell us his house was in foreclosure and all of a sudden we get a note on the door saying that the property has been foreclosed etc. now Watson Realty Company is trying to get us out in ONE WEEK with a $3,500 cash for keys offer. This just happened two weeks ago and I have a 4-year-old child, fiance, and another child on the way. This offer is ridiculous considering:

    • We are not getting our security deposit back from the original landlord
    • The realty company is low-balling us to leave the house in a week's time
    • There are no openings we have found yet until August 5th.

    Are we better off not signing and just staying the 90 days? (Your article) says to know your options and how long you have until you have to leave. How do you know what your options are and how long you will have before an eviction starts? The representative also wants the house broom-swept clean. When we started renting the house the back window was broken along with another garage door window and various other things. What if we move out and they consider the place unacceptable because of previous conditions?

    0 Votes

    • BA
      Jul, 2014
      Bill
      Under common law, a foreclosure terminated a lease. However, this rule changed when President Obama signed the Protecting Tenants at Foreclosure Act of 2009. If you have a lease contract, the new owner must abide by its terms. If you are a month-to-month tenant, then you have you have 90 days to quit the property. Follow the hyperlink I just mentioned to learn more about the Protecting Tenants at Foreclosure Act.

      Cash for keys is not a law: The property owner and you are free to negotiate any terms you wish. Ask if the new owner is willing to extend the deadline on your quitting the property.

      Whether you accept the offer and scramble to find housing, or wait 90 days is a decision you have to make. If, as you mentioned, there is no housing you can find by the deadline given you, you have the choice of either being homeless — which is really not a good choice at all — or staying in the property until you find suitable housing, then you need to stay.

      Check to see if there is a tenants' union in your area where you can find low- or no-cost legal advice.

      If you decide to accept the offer, schedule a walk-through in the property with the real estate agent, new owner, or property manager to document the pre-existing damage so that you can avoid paying for damage you did not cause.
      0 Votes

  • LC
    May, 2014
    Lisa
    Our house in Washington state was put up at a Trustees Foreclosure Auction on 05/16/2014. It did not sell, and is now the property of Fannie Mae. We received paperwork from the Mortgage Servicer, and have contacted him regarding the Cash for Keys program. He gave us three move-out dates to consider.

    We have a couple of questions about this that he has not given us clear answers to, so we hope to get some help from you!
    1. How much time do we have, legally, after the foreclosure sale to move out of the house?
    2. We were told that a foreclosure attorney would be contacting us a few days after the sale date, but we have not heard anything from them yet. Does this push out our move out date, since we have received nothing in writing regarding when we have to leave?
    3. The servicer told us that while the C4K program is in place, the foreclosure process keeps going as well. Does this mean that halfway through they can come and evict us?
    4. If we have an approved date and signed paperwork regarding the C4K and we simply can't get everything completely out by that date, what happens next and what is the legal penalty to us?

    Thank you in advance for your help!

    0 Votes

    • BA
      May, 2014
      Bill
      My first and last thought here is to recommend you consult with a Washington lawyer who has mortgage experience.
      1. The foreclosure-to-eviction timeline in Washington for homeowner-occupiers is unclear to me. My guess, note that word choice, is 20 days (RCW 61.24.060(1)).
      2. It is unclear to me if the notice you received is sufficient to start the 20-day clock mentioned in No. 1.
      3. My guess, note that word choice, is the cash for keys contract may increase the amount of time you have to occupy the property legally, but will not halt the foreclosure process.
      4. Your cash for keys contract will spell out the penalties you face for not vacating the property as agreed. My guess, note that word choice again, is you risk forfeiting some of the cash the lender is willing to give you to leave the property when you promise to.

      Because cash for keys contracts are unique from lender to lender and from state to state, no one can make blanket, detailed statements about their terms and conditions. If you do not understand any contract you are asked to sign, take it to a lawyer in your state who can read it and then explain what it means.

      0 Votes

  • MM
    May, 2014
    Michelle
    Our house has a sale date of 6-23 for foreclosure and friends said to ask about C4K. We have BOA and have not been contacted about this program. Should we contact an agent of BOA? We lost our home due to business bankruptcy and have 3 kids (one going to college) and need to relocate in the general area. Houses for rent in the area are about 2-3K plus deposits. Can you help me work my way thru the process as we could really use the cash to help with moving and starting set up in a new rental home. I'm feeling very overwhelmed with the whole prospect. My husband says we have to be out before 6-23, but I heard it takes a few days to weeks before the actual move out has to be done--this is a lot to take in---HELP!!!
    0 Votes

    • BA
      May, 2014
      Bill
      Review your foreclosure and eviction documents to learn the contact information at Bank of America, and call them now.

      As mentioned, banks and loan servicers have no legal requirement to offer cash for keys. In cases where they offer it, they do so to reduce their costs of a foreclosure and eviction. You have nothing to lose by calling Bank of America and asking if it considers you eligible.
      0 Votes

  • JR
    Mar, 2014
    Janet
    We are not late, and we have a renter in the house. We can rent it back out after they leave in June. And we can sell it for only $115,000 and we own $135,000. Would this cash for keys be good for us? I am not late on any payments!!
    0 Votes

    • BA
      Mar, 2014
      Bill
      Only your mortgage servicer can answer questions about what, if any, cash for keys program it provides.
      0 Votes

    • RA
      May, 2014
      REO
      I am a bank asset manager who handles the issues discussed here. You are eligible for cash for keys (C4K) if you actually reside in the asset. If the asset is a second home, you are not permitted to get a check.

      The idea behind C4K is to offer the occupant relocation assistance in exchange for leaving the asset broom-swept clean inside and out within the bank's time line, not yours. That's why they offer you money. Once the occupant vacates, the bank should only have to cut the grass and do maid cleaning (sales cleaning) do home can be marketed.

      If the occupant fails to vacate as per the executed C4K document the bank reserves the right to reduce the amount offered or no longer offer it at all. Also, the longer you wait to accept the C4K offer or even respond to the agent who will make several attempts at contacting you, the less you get because at that point the bank has paid good sum in evictions costs. Even if you offered to vacate the day after the PTFA expired..... the bank can say no dice.

      C4K is not required, but in some states if it is offered it must be at a minimum amount, usually the cost of the rent times 2x. If you have a lease it can be honored if you wish until the end of the term. but the bank is now your landlord and if your late just once they evict.... you didn't honor the lease.... pay rent on time.

      Also, if you are a tenant paying rent then you find out the house as been foreclosed on; stop paying rent to the former owner. KEEP IT IN YOUR POCKET!!!!!!
      0 Votes

  • HM
    Feb, 2014
    Herman
    Bank of America foreclosed on the home I'm living in in Oklahoma -- now Fannie Mae owns it. My significant other (we are not married) who owned the home went to prison and now it's just me and our two kids ages 8 & 6. The property management people contacted me and said I can keep living here or receive relocation assistance from Fannie Mae if I qualify (How do i qualify?). I would like to receive relocation assistance, but I am concerned I may not get anything because I don't have anything written stating I'm allowed to live here. I would like to know how I go about doing this and receive relocation assistance. I feel the property manager does not have my best interest so I hope I get some real help from someone who knows what they are talking about out here! Thank you very much!
    0 Votes

    • BA
      Feb, 2014
      Bill
      You're right about the property manager. He or she represents Fannie Mae's interest, and not yours.

      You mentioned Fannie Mae. Fannie Mae does not publish information about its relocation assistance program, other than to indicate it exists and can provide up to $3,000 to people who qualify. Do you qualify? Impossible for an outsider to say. Go to the Fannie Mae Get Help page and click on the "Fannie Mae Mortgage Help Centers" link to learn the telephone number of the nearest help center to you. Call, explain your situation, and learn if you qualify for relocation assistance.
      0 Votes