“Cash for Keys” refers to the concept of paying somebody to leave a property that they don’t own, for the purpose of getting them to leave. In other words, you have to pay squatters to vacate.
There are two reasons for doing this. The first is for former property owners who are going through foreclosure proceedings. As a parting gift, the mortgage lender will pay the foreclosees for not trashing the property. As noted below, there are realtors who advise people to ask for “cash for keys” and there are brokers that specialize in setting up the deals.
The second to get people who are renting (or squatting) on the property (likely foreclosed properties) to leave. This is easier and cheaper than going through eviction proceedings throught the courts. There is also the possibity that the squatters don’t believe that they are squatters, because some fraudster claimed to own the property and has ‘rented’ it out to them.
Here are some articles I thought were useful on the subject:
In MN the bank can’t evict the tennants until 6 months after the foreclosure sale. This is called the ‘redemption period’, which by MN law allows the original buyer a chance to buy back the property.
The buyback almost never happens (since no bank will give a loan to someone who just defaulted) so it basically just gives a free 6 mo period to squat and trash the place.
Banks Pay People Off To Deter Home Rage;
Mr. Buompensiero, a gray-bearded inspector for REO Asset Services-1st Realty Group, rang the bell. When no one answered, he taped a letter to the door offering the occupants $1,000 to move out. The catch: They won’t get a cent if they trash the house before they leave.
“If it was me, I’d take the money,” Mr. Buompensiero said as he drove away. Either way, they’re “going to get thrown out in a couple of weeks.”
Squatting is on the rise across the United States as foreclosures surge, eviction notices mount and homes go unsold for months, complicating the worst U.S. housing slump in a quarter century and forcing real-estate brokers to enlist the help of law enforcement and courts to sell empty houses.
In some regions, squatting is taking on new twists to include real-estate scams in which thieves “rent out” abandoned homes they don’t own. Others involve “professional squatters” who move from one abandoned home to another posing as tenants who seek cash from banks as a condition to leave the premises — a process known by real-estate brokers as “cash for key.”
“There are people who move in and know exactly who to contact and say ‘If you want this house, why don’t you come out here and offer me cash,'” said Detective Erin Camphouse of the Los Angeles Police Department’s Real Estate Fraud Unit.
“It’s just cheaper for the banks to do that rather than going into the courts,” she said. “The squatters are getting sophisticated and turning it on these banks who own the properties.”
California real-estate broker Steve Smallson said he finds about three squatting cases a month, compared to none last year, in his region of Woodland Hills, a middle-class district of Los Angeles. That includes a case in April involving a foreclosed home worth $1 million where police were called after neighbors reported squatters filming pornography in the house.
Squatting rises in U.S. along with foreclosures
Such cases of squatters’ posing as tenants are on the rise, said Bill Collins, president of the New Jersey chapter of the National Association of Real Estate Brokers. “These people claim that they have a lease but they can’t find it,” Collins said. “And the property owner has been removed from the property or been foreclosed on, so they have no interest in confirming if this person is a valid tenant. So now you have squatters who are assuming that they are tenants and have rights to some degree to stay in the property until we can go through the court system to get them out.”
And they have heard that what most of these banks are doing is giving “cash for keys,” or payments for quitting the property, that can range from $1,000 to $1,500, he said.
Lenders normally do not have staff whose job is to sell foreclosed properties, said Walker, who normally sells between 15 and 20 of these houses per month. After she agrees to sell a property, Watkins and Truong step in to put it in shape to resell. About nine out of 10 foreclosed houses are in need of repair or cleaning, Walker said.
Once the lender assigns a house to Walker, she checks it within 24 hours to determine if it is still occupied.
If it is, she offers the occupant a “cash for key” agreement in hopes of eliminating any eviction action. The amount of cash is based on the local market rental rate. If the owner refuses, the lender must file for an eviction, which could take two or three months to occur, during which time the occupant lives free on the premises.
“We find a lot of occupants decline the offer and remain on the premises,” Walker said.
Realtors and services:
We provide professional cash for key negotiations, eviction assistance and follow up, property preservation, weekly inspections, weekly property status reports, aggressive, marketing, professional escrow follow up, closing.
We have a very successful eviction ratio with our aggressive CASH FOR KEYS approach with tenants, we know time is money and occupants can stand in a way of maximizing return. We also provide close follow up with the eviction process and have showed up in court with our clients appointed attorneys, we believe that this is the most important role for the real estate broker in the REO process.
10 Basic Steps to Avoid Foreclosure:
If you have already been foreclosed upon and are still occupying the property, ask the mortgage company about CASH FOR KEY.