NC Cash For Keys

The facts about Cash for Keys


What do you do if you are in a foreclosed home that has just gone to sale due to foreclosure? The Cash For Keys is a way for renters and homeowners who are going through foreclosure to receive a cash settlement in exchange for surrendering the keys and vacating the property in good condition. Two of the biggest problems lenders/banks have when repossessing a home in foreclosure are the condition of the home and getting rid of its occupants. This is why the Cash For Keys are a quick and easy solution for many lenders. The term, “Keys for Cash” has been used by banks for years, but as we all know the 2007 subprime mortgage meltdown led to an influx of foreclosures which in turn prompted banks to initiate the Cash For Keys policy as standard procedure.

You may or may not know that banks are not in the business of owning property. When a bank gets title to the home through foreclosure proceedings, the bank is now responsible for the upkeep and preservation of the foreclosed home. If the bank has to spend additional money to repair damages caused by the occupants, the time and money increase the bank’s loss. As it is the bank already spends $55,000 – $65,000 for each home taken back through foreclosure. Included in that expense are the costs of evicting a homeowner or tenant not to mention the time it takes to go to court.

In order to save money during the foreclosure process, some lenders offer a program called “Cash For Keys” a program that helps preserve the property from any unwanted property damage. When you have exhausted all of your options and a short sale doesn’t work out to save your home, your lender/bank may offer you a cash settlement to walk away from the home in a peaceful manner. Unless your lender/bank offers the “Cash For Keys” program, you may need to call the lender to initiate the negotiation process. In general, lenders/banks will offer a cash settlement for your home or tenant-occupied property if you are willing to walk away quickly and peacefully. The lenders require the homeowner or renter to leave the property in good condition.

The advantage of Cash For Keys from the lender’s point of view is that the bank gets tenants/people out of the house quickly with the house in better condition than it would be in the event that an executed eviction. Banks generally negotiate an agreement with the occupants of a foreclosed home, which stipulates the home will be left in good condition and cleaned. Additionally, it is important for people to be aware that a Cash For Keys offer is a last resort because once the negation and paperwork have been signed, the tenant/owner will typically have no recourse. The agreements typically set forth a specific date that the home will be left vacant, including a promise from the occupants that they will not:

  • Vandalize the foreclosed home.
  • Take light fixtures, appliances, copper wiring or things that are attached to the property.
  • Leave pets behind.
  • Destroy the property inside and out

The lender will require occupants to vacate the property within 30 days without trashing a house.

The “Cash For Keys” program really helps the lender, saving them literally thousands on the costs to evict, clean up and preserve. Homeowners often have months of notice before foreclosure, but that’s not the case for everyone.

What should you negotiate when talking to the lender about Cash For Keys? Remember, everything is negotiable! Lenders typically do not automatically offer Cash For Keys. The occupant or tenant will normally need to contact the lender once the property goes into foreclosure. The following are some moving expenses you may want to negotiate:

  • A security deposit and first/last month’s rent for your next property
  • Moving expenses
  • Rental truck expenses
  • Utility deposit expense
  • Temporary living quarters such as a motel or hotel if needed

Sometimes, if the occupant agrees to an immediate move-out, the lender may pay a bonus.

Do not try to extort the lender or they may withdraw their offer. Remember “Cash for Keys” is not an obligation the lender must pay, but more of a benefit to the owner or tenant living in a home that has foreclosed.