There are those unfortunate situations where a Homeowner goes through such a traumatic financial hardship that they can no longer afford their home. In these cases it is best for the homeowner to stop foreclosure via a Deed in Lieu or short sale. But don’t stop there.
If a Homeowner plays their cards right they may be able to 3,000 to 5,000 dollars to help them move out and find a new place. This mortgage help program is known as Cash for Keys or Foreclosure Relocation Assistance.
Cash for Keys is a program that provides financial aid for homeowners and renters who must vacate their home due to a foreclosure sale. This financial assistance helps the occupants cover moving expenses and other incurred costs.
Origin of Cash For keys and Relocation Assistance Programs
Homeowners and renters are losing their homes at an alarming rate. Renters and homeowners who must leave their home due to a foreclosure sale are often left with a bitter taste in their mouth. Many who have lost their home are vengeful, and will even damage the property or home out of spite.
Lenders thought that the homeowner phone calls and furious complaints was as bad as it was going to get. Well they were wrong. Homeowner revenge came in the form of spiteful actions which commonly involved trashing the home. This revenge of the homeowner spawned a new risk management tactic called Cash for Keys
Cash For Keys Programs – How it Works
In simple terms “cash for keys” is a program developed by lenders that provides financial aid to occupants that must move and relocate due to a foreclosure sale. This agreement is usually conditional and requires the occupants to agree and honor certain move out dates, terms, and conditions. If those terms and conditions are honored by the homeowner than the lender will make a lump sum payment to the evicted occupants.
A typical homeowner may be offered a cash sum of 2,500 dollars given that they move out of the home within 45 days and that they leave the home in suitable condition.
Cash For Keys is a program offered to homeowners by lenders under the banner of financial assistance for those who lose their home, and as recognition of the financial hardship and relocation expense this creates for those directly affected. However this is not the “seed” from which this adopted practice has grown.
It is called good will but the real story behind it is two fold.
One; get the homeowner or renter out of the house quickly, and two; create a “if then” benefit or incentive for the occupants to resist any possible temptations to destroy the property out of spite towards the lender.
These type of programs are products of the free market.
Cost/benefit decision making convinced lenders that it is cheaper to hand over a few thousand dollars to a homeowner as a sort of bribe or incentive to move on quietly. The need to bribe angry and vengeful occupants came into large demand as the rise of foreclosure sales and thus evictions accelerated to unprecedented levels. Many folks who rented their home and paid rent to a landlord on time every month were rudely awakened to the horrible notion that they were in a home due to be sold by auction in short order. One does not need to a rocket scientist to deduce that such a family may feel a bit cheated.
Though cash for keys and foreclosure relocation assistance is offered through the homeowners lender there is now a government managed cash for keys program. The program was established by President Obama through his Making Home Affordable Plan. The Obama cash for keys program is part of the Foreclosure Alternatives Program which is for homeowners who can not afford their home even with a lowered mortgage payment through the Obama loan modification or other mortgage solution. We have a separate resource dedicated to that program specifically. As always we strongly encourage homeowners to check out the Obama Plan and other Government mortgage assistance programs that are available for homeowners who need to make home affordable.
How Much Cash for Your Keys?
The amount offered to the homeowner or renter varies, but a ballpark estimate is anywhere from $1,000 to $5,000 dollars.
Cash For Keys is often offered to real estate agents as a way to earn commission. The real estate agent will offer a lower amount say 500-1500 dollars and keep the difference for themselves. So make sure to talk to the lender yourself and request the full amount.
Real estate agents and other middlemen who earn commission on getting occupants out of the home have been known to use some unethical tactics involving intimidation and deceiving folks into moving out before they legally have to. Homeowners have even reported people trying to barge in the house as if they own the place.
A key tell is an offer of say 1800 dollars if the homeowner moves out within the next 15 days, and a lower amount, say 1100 dollars, if the homeowner moves out in 30 days.
Getting More Cash for Your Keys – Helpful Homeowner Tips
- Financial Hardship Letter – If you have not yet submitted a mortgage hardship letter to your lender be sure that when you do write it you mention that you don’t how you are going to be able to handle to moving expenses without some sort of financial assistance. I wouldn’t even suggest requesting it specifically at this point. Simply mention that you don’t have a way to cover it unless you can come up with $6,000 dollars some how.
- Deal with the Lender Directly – I have personally heard at least a dozen first hand accounts of real estate professionals walking into homes to “bully” or “scare” homeowners into moving out sooner than they had to. The story was always more or less the same. Typically the ex homeowner was offered one amount to move out with in 30 days and a higher amount to move out in 15 days. I can recall one time specifically I negotiated a 5500 lump sum payment to be paid as relocation assistance. The next day the homeowner reported a “nasty” agent coming over and demanding they leave that week. He offered $700 dollars. This is why its important to deal with the lender directly.
- Ask for More – This is a negotiable figure. You should ask for more at least once. If they say no you could tell them that your planing on moving on such and such a date but if you were able to get the extra assistance you could move out earlier. The worst that can happen is that they will say no. Just be sure you are smart about it. Don’t get mean because they don’t have to give you a dime.
- Don’t Damage Property – Do not damage the property before moving out. There will most likely be a condition that no damages can be afflicted on to the property to get the cash. Plus that’s just bad manners.