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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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 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.

ach state legislature created unique foreclosure and anti-deficiency 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

Bills.com

133 Comments

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  • CD
    Jan, 2013
    caryn
    Have been offered cash for keys program. Reading here it says appliances must stay. They are mine. When I moved in what was here was not usable. Do I have to leave my appliances?
    0 Votes

    • BA
      Jan, 2013
      Bill
      There are no universal rules for cash for keys. Because cash-for-keys is an idea and not a law or rule, every term and condition in a cash-for-keys deal is subject to negotiation.

      If you bought the appliances because the home's existing appliances were unusable, and you want to keep them, then do so. However, disclose your wishes to the mortgage servicer so it is not surprised if it assumes the appliances were to remain in the property. Who knows, the servicer may want the appliances, and may sweeten the deal to convince you to leave them behind.
      0 Votes

  • TC
    Dec, 2012
    Thomas
    My fiance and I just received a letter from the bank regarding the home we live in. She works as a property manager for her father who owns quite a few other properties including this one. He lets us stay here "rent free" in lieu of her acting as a property manager. The letter stated that he is just under $3k past due on the house payments.
    "And if not paid by 01/21/13 the house may result in acceleration of all sums due under the Security Instrument. This means the entire unpaid balance will become due. Also, your property be sold in accordance with the terms of the security instrument and applicable law."
    Our concern is if this amount is not paid what will happen to us. Also would we qualify for cash for keys? Thanks in advance. If any further information is needed please ask.
    0 Votes

    • BA
      Dec, 2012
      Bill
      State laws allow a lender to foreclose on a secured property when the borrower fails to make the agreed loan payments. Under common law, a foreclosure terminated a lease. However, this rule changed when President Obama signed the "Protecting Tenants at Foreclosure Act of 2009." Before this date, renters lost their leases upon foreclosure.

      If you had a customary relationship with a landlord that involved a written lease spanning a long period of time, the Protecting Tenants at Foreclosure Act would apply to you. Here, however, you and the landlord do not have an arms-length relationship, and may or may not have a long-term lease for the property. It is unclear to me if the Protecting Tenants at Foreclosure Act applies in the circumstances you described.

      Talk to the landowner about his plans for the property. You are at the mercy of his finances and decision to catch up on the delinquent payments, sell the property, or allow a foreclosure. His plans and actions will dictate your next steps.

      Cash for keys is an idea, and is not a government program or law. The lender here may make a cash for keys offer to all its delinquent borrowers, to some under some circumstances, or no one.
      1 Votes

  • CC
    Oct, 2012
    chad
    The majority of landlords do not report their rental income on their yearly tax returns. This may get a tenant some leverage in negotiations with an unreasonable landlord. That is, if they want to stay out of jail. Threaten a call to the IRS. See if that gains you some leverage.
    0 Votes

  • MS
    Oct, 2012
    Myrna
    The condo I was living in is going into a short sale - I was offered $3,000 to move out within 6-8 weeks which I did and left the apartment as clean as I could - Closing on property will be 10/17 - Title Co. told me that once the Closing occurs, the bank will fund the moving expenses I will get my money. What I want to know is how long does it take for the bank to fund the moving expenses to me after closing. I Thank you. Myrna Stern
    0 Votes

    • BA
      Oct, 2012
      Bill
      Impossible for us to answer your question because there are no laws or industry rules mortgage servicers must follow for cash for keys. What does the cash for keys or short sale contract your signed contain regarding the terms and conditions for your $3,000 payment?
      0 Votes

  • TT
    Oct, 2012
    Tory
    My elderly parents were offered cash to clean out a home they owned that someone else had been renting. The house and property are in deplorable almost hazardous conditions. I'm not sure how much clean up they will be able to do to the house and the is 7 acres of overgrown yard as well. They are now being told that they will also have to replace a stove (the one there had been thrown out before the forclosure because it didn't work.) How likely is it they will even receive any cash for their efforts?
    0 Votes

    • BA
      Oct, 2012
      Bill
      Cash for keys is a voluntary agreement between the lien-holder or its representative and the owner or tenant. Generally, to get the cash, a place needs to be presented broom-clean. Given the amount of work that your parents have to do, it does not sound likely any cash will be forthcoming. I suggest you speak to their contact-person, to get further clarification.
      0 Votes