Cash For Keys
“Cash for Keys” is an option for lenders who want to take ownership of a foreclosed or surrendered property quickly by offering money to the current occupant. In exchange for the cash, the resident hands over the keys and promises not to damage the property. Most Cash for Keys agreements specify that the home must be left in “broom clean” condition.
Is Cash for Keys mandatory?
No. It is completely up to the lender whether they want to offer a Cash for Keys agreement. When offered, it is up to the occupant to accept or reject the proposal. One way or another, foreclosed homeowners will have to vacate and surrender the property; Cash for Keys is a voluntary policy on the part of the lender.
Why would banks pay an occupant to leave?
There are 2 primary reasons Cash for Keys is an attractive option for lenders who are foreclosing on a home.
- Protecting the home’s value. Foreclosed homeowners may leave pets behind, locked in the house for days. They might strip copper wiring from the walls, take light and plumbing fixtures, or remove major appliances. Some homeowners have been known to vandalize the home in ways that are extremely expensive to repair. Cash for Keys gives the homeowner money to relocate in exchange for not damaging the property. Better to hand a few thousand dollars to a vacating homeowner than to spend tens of thousands replacing the entire home’s plumbing.
- Removing the occupants. In almost every state, the law is on the side of the tenant during foreclosure. At the end of the foreclosure process, the tenant will have to leave, but the process will take at least 60 days, and frequently will take 3 months or more. Cash for Keys is a way for lenders to help residents be able to afford to move out right away, so the lender can take over the property immediately rather than go through several months of a foreclosure process before getting possession of the home.
Is there a required amount for Cash for Keys payments?
No. Generally, lenders will offer around 1% of the home’s value, so a $200,000 home will get the resident $2,000 in relocation assistance. But the amount offered, just like the decision to offer Cash for Keys in the first place, is up to the lender.
Is the offer negotiable?
Yes, a resident can reject an offer and propose a counter-offer, but residents who are too aggressive will likely be denied. The foreclosure will most likely happen anyway, so the bank won’t do too much negotiating at the Cash for Keys stage. One point of negotiation other than the amount of money offered is time. A Cash for Keys offer might have the resident collecting a certain amount of money and vacating by a certain date. A resident might counter-offer accepting the money part, but asking for a bit more time before they vacate.
Are there state laws governing Cash for Keys?
Most states have laws regulating foreclosure processes, which is one reason Cash for Keys is an attractive option to lenders. But only one state, Connecticut, has formal laws on the books about Cash for Keys. This law doesn’t require a Cash for Keys agreement to be offered in any case, but if a cash incentive is offered to a tenant, it must equal at least the total security deposit and interest, two month’s rent, or two thousand dollars, whichever of those three amounts is greatest. Tenants may not be required to waive their legal rights or remedies as a condition of accepting the offer.
Other localities may enact laws like this one, but it’s important to note the Connecticut law applies to tenants, not foreclosed homeowners.
If you have been presented with a Cash for Keys form and can’t decide how to proceed, call us today for free, confidential counseling and expert advice.