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