Terry Rasner-Yascenda, Broker/Owner of Reno/Tahoe Realty Group LLC and member of the FORCE Advisory Council, has been doing cash for keys transactions since 2008 and answers some questions about this program lenders are using to make the foreclosure process easier on everyone.
How much is paid for keys?
I’ve seen anywhere from $500 to $10,000, but the average is usually $3,000 to $5,000. It’s usually the first and last rent plus the deposit. We make these payments to homeowners and renting tenants, whoever’s living in the property.
How does cash for keys differ from deed in lieu?
A deed in lieu is an alternative to the foreclosure process. It’s not really pre-foreclosure, per se, since it happens after foreclosure starts, but it cuts the foreclosure process short. You would just say, “I’d rather have a deed in lieu,” and hand the lender your deed instead of continuing to foreclose. Cash for keys is the relocation assistance that happens afterward. It helps to shorten everything, and that’s what makes it so appealing.
Advantages of cash for keys
Foreclosure is very humiliating. People are showing up at their door, signs are going up, and they don’t want their neighbors to know. Cash for keys is a dignified, respectable way for people to relocate in a foreclosure, deed in lieu, or short sale. It’s a win-win situation for both parties. It’s good for the banks because when people are getting this money and engaging in the deal, they’re not going to tear up the house. Fannie Mae now even offers half up-front, to help with moving costs, and we haven’t gotten burned on that so far. No one has taken it and ran.
What are the requirements on the part of the homeowner?
They are obligated to leave the property what we call “broom-swept” clean. They don’t have to scrub it out, but they must get all the trash out. They can’t take the fixtures or anything, and they have to leave whatever’s there in good condition. It’s an agreement of mutual respect on both sides.
What is the process of a cash for keys transaction?
In short, the bank initiates, they email us, we fill out paperwork, take pictures, get signatures, and document the whole process. The process is we show up at the door, leave a card, ask that they contact us, and tell them their house has been foreclosed on. We ask if they’re interested in relocation assistance, and most people ask what that is because they have no idea they can ask the bank for this money. Once the bank has told us their offer, we’ll tell the homeowner how much the bank is offering and ask if they’re interested. If they agree, they start moving out. They must be out in 30 days, but sometimes the bank will give more money for getting out sooner. We show up afterward to check the asset and make sure everything meets the terms. We take pictures, give them the money, and they’re off. I think it’s a great incentive.
Do you ever have people turn it down?
Yes, sometimes they do. It’s usually because they don’t understand the process and think they can somehow stay in the house. Sometimes they just need more time, and some banks will give it to them. We’ve also offered the option twice before. It doesn’t happen very often, but sometimes the bank will say to ask them again but offer less. We just go out there every day, checking and posting notices, and they will eventually accept it or just leave without telling us. I would say about 10% don’t accept, about 5% need more time, and about 5% turn it down because they don’t understand the process.
What are the problems you encounter most often?
One of the greatest problems we face is not knowing if people are tenants or squatters. I had a property a while back where we kept visiting, posting, and offering cash for keys with no response. We finally learned that they were squatters and ended up having to evict them.
Some people are convinced their house isn’t foreclosed on and are in a state of denial. They’ll tell us to get off the property, hire attorneys, and file suits. We then have to deal with all the legal ramifications and report what happened back to the lender. We’ll ask them to have their attorney call us, and we’ll never hear from them. Sometimes they’ll simply ignore us, and we have to start the eviction process when we can’t find them.
I’m always grateful that it’s me that gets to go to the door. We always treat everyone with respect; we don’t know what they’ve been through, we haven’t walked in their shoes, so we don’t judge them, we just treat them as a fellow human being. There are a lot of good people that get foreclosed on. You have to tell them why it’s important. Sometimes I get our staff involved to help the people who don’t have anyone, which I’ve seen a lot. There aren’t enough community services in place for them, and we have to help. It’s just the right thing to do, and that’s the best advice I can give you.