Musings on Cash for Keys & Foreclosures

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Agents, homebuyers and individuals facing foreclosure frequently ask me about this thing called ‘cash for keys.’ Somebody’s uncle’s cousin’s sister told someone that they can get ‘cash for keys’ if the property goes to foreclosure, and homeowners generally want to know whether this is true.

And, yes, in a nutshell, it’s true.

What is Cash for Keys?

Here’s the deal: It is the general practice of many entities that have foreclosed on properties to offer those individuals currently residing on the property ‘cash for keys.’ Usually, this comes in the form of a cash incentive provided in the form of a cashier’s check when the resident provides the keys to a broom clean property.

The first order to business after the property is foreclosed is for the new owner (or a representative of the new owner) to contact the resident and offer cash for keys. If the resident agrees, then a Cash for Keys Agreement is usually signed. This agreement may even include a W-9 (which would indicate that a 1099 may be in the future).

Note that this agreement does not preclude the new owner from beginning eviction proceedings on the property under certain circumstances. However, generally, things move more quickly and efficiently in a Cash for Keys Agreement versus eviction proceedings.

The other day I received a phone call from a woman whose property had been foreclosed and purchased at auction. The new owner was calling her and dropping by the property and stating that he would be changing the locks in 48 hours, so she had better get out. While laws do vary from state to state, there are specific rules as to how a new owner can reclaim his property and court proceedings are usually required.

So, if you have purchased a foreclosure and you have some tenants that you need to move, make sure to get familiar with the laws surrounding eviction proceedings and the policies surrounding cash for keys in your state.

Photo: flickr creative commons by Bohman

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About Author

Melissa Zavala is the Broker/Owner of Broadpoint Properties and Head Honcho of Short Sale Expeditor®. Before landing real estate, she had careers in education and publishing. Many folks say that Melissa is genetically pre-disposed to success with short sales. In fact, last year she and her staff obtained over 500 short sale approval letters! When she isn’t speaking with lien holders, Melissa enjoys practicing yoga, walking the dog, and vacationing at beach resorts.

3 Comments

  1. Does anyone know how I can get Fannie Mae to give me documentation that they are now the owner of my property? I signed a deed in lieu of foreclosure in March; have been told that they own the property as of April; three calls to their headquarters and each person I spoke to refulsed to provide me with documentation. Meanwhile, I am still being billed for association dues and fees, insurance, and lease rent. Also, my name has been sent to a lawyer for collection by my condo association. I need to prove that I am no longer the owner.

  2. Great post Melissa!
    Note that this agreement does not preclude the new owner from beginning eviction proceedings on the property under certain circumstances. However, generally, things move more quickly and efficiently in a Cash for Keys Agreement versus eviction proceedings.

    I am having a query, are you a lawyer?
    It’s always like, I found your articles interesting, and helpful.
    Great!

  3. Pingback: Fannie Mae Rehabbing Homes Before Bringing Them to Market « John Murphy Reports

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