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Explain “Cash for Keys” on Southern CA Foreclosure Homes for Sale?

Call 562-888-0404 for more information about Buying or Selling Homes, Houses, and Real Estate in Southern CA, Long Beach CA. and Orange County CA

Since a great deal of the Real Estate market has to do with foreclosures and short sales and other bank owned types of property…

… one of the phrases that everybody hears is cash for keys. People say it all the time. Some people know what it means. Some people don’t.

 

What is a Cash For Keys Move Out Agreement on a Foreclosure?

Eric: Since a great deal of the market has to do with foreclosures and short sales and other bank owned types of property, one of the phrases that everybody hears is cash for keys. People say it all the time. Some people know what it means. Some people don’t. So, what Frank’s gonna talk about today is cash for keys/move out agreement, what is it and how does it work? So, you are going to educate everybody about what cash for keys is, how does it work, why people do it, and what to expect, right?

Frank: Yes.

Eric: Alright so we are going to lead for 9 minutes and you go friend.

Frank: I’ll go right ahead. Basically, cash for keys means it is in the phrase right there you are living in a home especially if you are a tenant and I feel there is a big injustice going on out there I was actually talking to Scott about it.

Eric: Fix it, Frank.

Frank:  I am encountering a lot more nowadays especially where after it has been foreclosed, I approach the property there is a tenant, not the former borrower but a tenant living in the property who is absolutely unaware that the foreclosure is taking place or that it even happened yet. They have been making good on their rental or lease payments but the former owner or their landlord hasn’t been making good on the mortgage

Scott: They are in Fiji surfing.

Frank: There you go. They are over there with Jeff Rudy. So, I completely and absolutely do my best to show my greatest compassion and understanding at the same time there is a process that is going to start to take place regardless of what there circumstances. When a property goes to foreclosure and even though there is a lot of talk right now about rental arrangements or lease arrangements and so forth usually the seller’s main objective is to get the property vacant and get the property sold, because it is a liability. It might sound like a great idea that you are leasing to a tenant that is in your foreclosed property but along with that is a lot of liability. So, their first main objective is to get that property vacant. They way that they are going to do it now is first we try to find out who is living there, tenant or former borrower. Once we find out who is living there the bank is going to evaluate things based on who is living there and how they are going to approach the situation. Usually, they are going to make a cash for keys offering to whoever is there.

Eric: Do they make cash for keys offers to everyone or do they try to kick them out without making them?

Frank: No, they make it to everyone. Of course, they are going to have more compassion to tenants, because the tenant is really victim of circumstance.

Eric: The tenant being a renter.

Frank: A renter, but still right now their policy across the board is to show courtesy to everyone. Now, the cash for keys is usually going to be delivered or they’d like it to be delivered directly from the agent. They want me to make direct contact to who is living there and to hand it to the person who is in the property rather than just blindly send it through mail. If I do send it through mail, then you see it certified. So, if you see a certified MOA or cash for keys agreement more than likely it is very legitimate, contact that agent. Do your research.  Contact the county to find out if the property has been foreclosed.

Eric: Because you might not even know as the renter.

Frank: But, more than likely someone who is trying to pull a fast one on you isn’t going to be offering you money.

Eric: Right, they are going to be asking you for money.

Frank: They are going to be asking you for money. The reason I want to make personal contact and obviously I am handing it to the person who lives there are, because if you were just to mail it let’s say that property were up and vacant and some squatter came by and claimed they lived there. They are just pretending to live there to get the money.

Eric: Cash for keys. Oh, my God, does that happen?

Frank: It happens. It doesn’t happen as much anymore, because we are careful about our approach to the property. But, getting back to what the cash for keys is usually it is an offering for a particular amount of money for vacating the property in a particular amount of time.

Eric: it is always the same amount of money?

Alissa: No.

Frank: It depends from bank to bank, you know. You can throw numbers out there. Some banks might throw out a couple of thousand dollars. Some banks might offer $10K. It really depends bank to bank.

Eric: Which bank offers $10K?

Frank: Well, we are not going to talk names.

Eric: Common.

Frank: Standardly the days are the same. They are looking for a 30 day move out.

Eric: How soon does somebody get cash for keys offer? At what point?

Frank: I’d say within about 2-3 weeks after the foreclosure date. First we want to take a little time.

Eric: Is that the NOD?

Frank: No, the trustee sale after the property has already been foreclosed no investor, no one else bought it. It went back to the beneficiary or the owner.

Eric: So, you couldn’t get a short sale done on it.

Frank: Couldn’t get a short sale. Couldn’t get it sold at auction. It goes back to the bank usually about 2-3 weeks after you are going to have an agent more than likely or a certified letter for cash for keys at that point, review it carefully look at the terms and conditions are so on and so forth. Usually though the bank is going to be really firm and not want to change one article or one sentence in that agreement. So, go ahead and review it. If you decide to go out and get an attorney to help you perform that, just remember that you need to deduct the amount that the bank is offering you from what the attorney is charging you to help coordinate that. The bank is usually not going to kick that number up to pay for your legal costs also. There are some services out there that will give you some basic brief overview or some people have the, what do you call it? Pre-legal, prepaid legal that is always a good idea.

Eric: Legal Zoom, baby.

Frank: They will review it for you to tell you yeah, this is all in accordance with the standard cash for keys verbiage says. Now, it’s up to you. Do you think that amount of money being offered to you in that amount of time works for you? A lot of people think you just have to take it. I will be honest, go back and  . . .

Eric: It’s negotiable.

Frank: . . .you can try to negotiate.

Eric: You can try.

Frank: Sometimes the banks say they might have max’ed out right from the beginning and that is it. They are pretty strict about their cap. So, if they offered you $10K . . .

Eric: That’s a pretty good offer I like that.

Frank:  . . .you may need $20K you know? But, $10K is pretty reasonable. I think right in this market it covers your first, last and moving expenses.

Alissa: And, then some.

Eric: Which is the goal.

Scott: You’ve got to assume that they are going to lose their deposit because the landlord . . .

Eric: He’s not making his house payment. There’s a pretty good chance he is not going to give you back your deposit.

Scott: Right. There is also like a condition contingency usually on those?

Alissa: Yeah, you’ve got to leave the house.

Scott: Yeah, they are going to do an inspection.

Frank: Usually, it is going to say that the property is going to have to be left in broom clean condition and they really do mean that. You don’t have to go scrubbing walls and steam cleaning carpets and things like that, but you can’t have any articles paper, trash, and debris inside/outside the house on the curb on the driveway, in the back.

Scott: But, the time you make the offer, the time you make the cash for keys offer, do you make a quick inspection to make sure it is the same when they leave?

Frank: Yeah.

Scott: Because it might be trashed now.

Frank: Well, I understand when going to a property that has been foreclosed a lot of the time it hasn’t been well maintained, but that doesn’t mean that you can leave wire hangers and trash and debris all over the place.

Scott: When you rent a car they ask you to walk around and identify and dings or scratches. So, you don’t get blamed for it later. Do you do the same sort of thing?

Alissa: Do you take pictures of the condition you left it in?

Frank: Pretty much, but the agreement is pretty clear not to damage property or to remove attached items. I need to know ahead of times and I am always quick to ask, is there anything that you did attach yourself that you are going to take with you that I need to tell the bank ahead of time? Because I go in there and I see all of these light fixtures missing and part of the agreement was that you are not to remove these things. If you tell me ahead of time and we both agreed about it and we go in there and I see that big chandelier is missing, then we are fine. We are fine.

Scott: Alissa had a good idea. If there is any damage to the property any holes in the walls or anything like that then take pictures and they usually have time codes on them. So take those pictures just in case.

Frank: You want to show up and see things like that I am not picky about that because it is a hole in the wall. If I see that there is excessive damage and it looks like it happened, because you were upset about this whole thing, we may have an issue, but at that same time, if the house is clear I really want to conclude this matter. You go your way and I’ll go mine and let’s just get it done.

Eric: Break it down, Frank. Break it down.

Frank: So, the break it down basically the cash for keys it can work out. You can try to negotiate, but more than likely the offering that the banks are making right now are the offering they are going to make after 2-3 attempts at a counter. So, that is something to consider. They may be a little looser for time you know. If it says 30 days and you are cooperative with them for the amount and it looks like you are working with them, they may give you more time but not more money. So, if you are really going to push for something, I think you’d better push for time rather than the money. But, these things do work out and it does give that tenant or even that former borrower a little bit of money to get on and start their new life and it works out for everybody.

Eric: There you have it. Cash for keys.

Call 562-888-0404 for more information about Buying or Selling Homes, Houses, and Real Estate in Southern CA, Long Beach CA. and Orange County CA

 

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