Cash for keys is a concept for homeowners whose home went into foreclosure 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 Protecting Tenants at Foreclosure Act of 2009, 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.
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.
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.
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