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One of the fears for many who have a house in foreclosure is that the lender will toss them out on the street and they’ll have no place to go. It’s a valid fear, especially for those who’ve lost jobs, run through their savings, are about to lose unemployment benefits and still have no solid employment opportunities in sight.
If this sounds like you (or someone you know), then you need to know about lender “cash for keys” programs.
What is Cash for Keys?
Cash for keys (aka, keys for cash, cash for keys program, cash keys program, agreement, cash for keys relocation program) is simply when a lender agrees to pay the homeowner who’s house is in foreclosure to vacate the property.
Following is the rationale behind lender cash for keys programs:
A homeowner may ask, “I have a house in foreclosure, why would a lender pay me to move?”
Lenders do this on homeowners who are in foreclosure for a number of reasons:
Cash for Keys Programs: Why Lenders Pay Homeowners Cold, Hard Cash to Leave Their Homes
It’s Cheaper for Lenders: Because they don’t have to go through the entire home foreclosure process if you agree to leave the property and accept a cash payout. According to the industry-leading home foreclosure blog, ForeclosureFish.com:
On average, banks lose about $60,000 on a foreclosure in terms of paying lawyers, filing fees in court, property taxes and insurance for the home, administrative and maintenance costs, and lost revenue once the owners stop paying.
As this figure indicates, foreclosing on a property is an expensive undertaking, and any fees that can be mitigated saves lenders.
Another way the cash for keys programs saves lenders is that it deters homeowners from trashing a property. And, this happens more than you might think. According to a recent post here entitled, Home Foreclosure News: 13.9% of All Foreclosed Properties Vandalized
About 13.9 percent of all real estate properties owned by a bank or agency were so badly damaged that they did not qualify for standard mortgage financing, according to data collected from real estate agents across the country for November 2010.
Ouch (for lenders)!
As the CBS 3 News article, Homeowners Trash Houses During Foreclosure, sums up so succinctly: “Banks that own foreclosed homes that have been trashed have to hire clean up crews. It can cost thousands of dollars.”
Cash for Keys: Specific Info You Should Know
Time to Leave: Usually, lenders will give homeowners anywhere from 30 to 60 days to move out. This varies from bank to bank though. There have been cases where banks have allowed (yes allowed) homeowners to stay 6 months or more without paying the mortgage – and still give them “cash for keys” when they vacate the property.
Why? Because foreclosed properties are magnets for thieves, vandals and squatters. It’s better for them to have homeowners stay there until the property is resold and/or can be secured than to have it sit empty during this process. Read one example where a bank paid a homeowner to say in her foreclosed property.
Leave It Clean: The whole idea behind the cash for keys programs is to mitigate lender costs, hence, one requirement that all these programs have is that the home must be left in “broomswept condition.” What does this mean?
Simply that the property must be at least surface clean. You don’t have to shampoothe carpet and paint any dirty walls, as “normal wear and tear” is acceptable. But, there can’t be any visible signs of vandalism, eg, holes in the walls, appliances ripped out, damaged flooring or ripped up carpet.
Generally, all fixtures must be left, as well as major appliances – even those you may have purchasd (eg, your refrigerator). And, this means outside buildings as well. All toys, pets and pet care items, lawn equipment, old cars, junk and debris must be cleared away from the yard and outside structures.
How Much Cash Can You Can Get? If your house is in foreclosure and you agree with the bank to move out, generally they’ll pay you anywhere from a few hundred dollars on up to about $3,000. Every lender is different.
Some have set amounts that they’ll pay, eg, $2,500 at HSBC bank for example. Others may base it on a percentage of the appraised value of the home. And, some homeowners have been able to negotiate higher payments via their lender’s cash for keys programs; one homeowner said he got over $8,000, stating:
On my house they offered me $4000.00 and to be out in two weeks. I told them it wasn’t enough money and I’m not interested. They replied back to me the same day and said ok we will offer you 8100.00 and four weeks to get out. I thought OK deal.
Apparently, You Can Negotiate Cash for Keys Payments: Many banks are formalizing their cash for keys programs, so may not be willing to negotiate payments. But, if you feel the amount they’re offering you is too low, ask for more.
As one poster commented in a cash for keys post on a website said, “I asked my friend who is a realtor she said they can offer you up to $10,000 per house max. That’s what the banks can afford. Ask around. Learn more in the video below.
Filed Bankruptcy to Prevent Foreclosure? How to Still Qualify for Cash for Keys
In a post on Wednesday, we’ll discuss how to still qualify for Cash for Keys if you’ve filed bankruptcy. There are special stipulations that apply here. And in a later post, we’ll discuss cash for keys for renters (yes, if you rent, you can qualify for a keys for cash payout).
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Copyright © 2011 Yuwanda Black for Foreclosure Business News. Article may not be reprinted or reproduced in any manner without the express, written consent of the author.
Learn More about Cash for Keys