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Cash for Keys and Foreclosure

Cash for Keys and Foreclosure
Daniel Cohen
UpdatedNov 7, 2023
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    4 min read
Key Takeaways:
  • 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.
  • 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.

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??

What is a Cash for Keys Agreement?

Cash for keys is a concept for a homeowner 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 is 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 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 even actively to 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.

Cash for Keys - 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.

Quick tip: Each state legislature created unique foreclosure and anti-deficiency laws. Follow the links just mentioned to learn the foreclosure rules relevant to you.

Eviction Insights: Leveraging Your Tenure for Better Cash for Keys Agreements

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 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 - Compensation for Cash for Key Agreement

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.




MMay geasland, Feb, 2020

I am losing my home in a foreclosure.

DDaniel Cohen, Feb, 2020

May, I am sorry to read that you're losing your home. Did you have a question you wanted to ask?

NNicholas Paul, Jul, 2014
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?

BBill, Jul, 2014
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.
LLisa, May, 2014
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!

BBill, May, 2014
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.

MMichelle, May, 2014
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!!!
BBill, May, 2014
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.