If you are in foreclosure and have decided that the property is not worth keeping, you may have heard the term, cash for keys. It sounds catchy and clean. As the name implies, you hand the keys of the property to the mortgage lender and they give you money in return. Before deciding that this is the right option for you, there are a few things to consider.
What is the process of cash for keys?
First, check with your bank if they offer cash for keys and find out if you qualify. It is not required by law that all banks offer a cash for keys program, but many do. It is often in the bank’s favor to have a homeowner leave their home willingly instead of undergoing the entire foreclosure and eviction process. If your bank offers the program the next step is to find out if you qualify for the program. Banks typically prefer a short sale over receiving the deed for the home because if they become the owners of the property it is their responsibility to maintain the home and list it for sale.
Cash for keys is basically a deed in lieu of foreclosure, where a homeowner signs an agreement with the bank to hand over the deed of the property to the lender. The agreement should have some stipulation stating that the bank will not go after you for any deficiency judgment. However, it is not legally necessary for the bank to waive the remaining balance, in which circumstance you should have the foreclosure defense attorney negotiate on your behalf to ensure that the bank cannot file a lawsuit for difference.
What makes cash for keys different, from a deed in lieu of foreclosure, is that the bank will often agree to an amount that they will pay the homeowner to vacate the property. As part of the agreement, there will be a set period of time by which you need to move out, often between 90 to 120 days. Additionally, in the agreement the homeowner promises to leave the property in “broom swept” condition. This means that all personal belongings need to be removed from the property, walls need to be returned to their original condition, and all appliances must be left on the property.
Accepting a cash for keys offer is not a decision that should be taken lightly. When the agreement is signed and returned to the bank, the owner relinquishes all rights to defend the foreclosure suit and the owner is consenting to judgment. Once this agreement is complete, there is very little or nothing that an attorney can do reverse the contract.
Who can benefit from this option?
A homeowner that doesn’t have a second mortgage on the property can consider the cash for keys option. Typically it is not the best option for owners with a second mortgage because banks will only waive a deficiency on the primary mortgage. Though banks may still consider doing a cash for keys program, the homeowner will remain responsible for the second loan on the property.
Before making any agreements with your bank, speak to a foreclosure defense attorney. Once you sign an agreement, you will lose the option to keep your home and you will have a set date for leaving your home. At Graham Legal the consultation is absolutely free and we can offer possible alternatives and more information on cash for keys and other programs.