Cash for Keys and Foreclosure

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

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Bill's Answer: Answered by Daniel Cohen

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.

Wise Advice Each 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

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Comments (143)


Janet R.
Virginia Beach, VA  |  March 20, 2014
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!!
Bills.com
March 20, 2014
Only your mortgage servicer can answer questions about what, if any, cash for keys program it provides.
Herman M.
Tulsa, OK  |  February 20, 2014
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!
Bills.com
February 21, 2014
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.
Pat P.
Oxnard, CA  |  January 11, 2014
I understand how the cash for keys works but does it apply to mobile home owners as well? Over 55 park. First lien.
Bills.com
January 13, 2014
Because cash for keys is an idea and not a state or federal law, the only way you can learn what your loan servicer offers is by contacting your loan servicer.
Lina B.
Miami, FL  |  January 10, 2014
I am living in a friend's apartment, which is under foreclosure. The sale date is in February. I don't have any lease agreement, but I would like to know if I am eligible for cash for keys, even if the bank does not know I live in the property. How many days after the sale date do I have to move out? I live in Miami, Florida.
Bills.com
January 13, 2014
There are no universal rules for cash for keys. It is not a federal law, or part of the common law. Cash for keys is an idea. Each mortgage servicer — the company the consumer sends their monthly home loan payments to — may create their own cash for keys plan. Or, they may not create such a plan. Therefore, your only source of information about any cash for keys plan that might or might not be available to you is the borrower's loan servicer.
DM H.
Sacramento, CA  |  January 04, 2014
I just pulled a home out of foreclosure. There is a family living there (squatters). They been there over 4 months. They are asking cash for keys to move. What can I do the get them the cash for keys so they will move?
Bills.com
January 06, 2014
Cash for keys is not a government program. It's an idea that some mortgage servicers created to cut their costs when foreclosing on residential property.

You have two options here: soft and hard. The hard option is consulting with a lawyer who has real property experience, and your local sheriff's office to learn the proper procedure for eviction in your state. Make sure you follow your state eviction laws to the letter, as a botched eviction can be expensive.

Your soft option is to create your own cash for keys plan. Call the squatters and offer them a couple hundred dollars to move on the condition they leave the property in a clean and habitable condition.
Caryn D.
Van Alstyne, TX  |  January 05, 2013
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?
Bills.com
January 05, 2013
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.
Thomas C.
Stockton, CA  |  December 20, 2012
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.
Bills.com
December 21, 2012
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.
Chad C.
October 23, 2012
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.
Myrna S.
West Palm Bch, FL  |  October 16, 2012
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
Bills.com
October 16, 2012
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?
Tory T.
Covington, GA  |  October 16, 2012
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?
Bills.com
October 16, 2012
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.
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