Many banks offer residents cash in exchange for a vacant house left in good condition. Obtaining possession of a foreclosed home as soon as possible helps to minimize the bank’s losses. The bank determines the amount of money it gives the homeowner or occupant of a foreclosed property, and may even offer money to avoid the foreclosure process altogether.
Foreclosure Occupants Who Get Money
Known as “relocation assistance” and “cash for keys,” the money that banks give residents of foreclosed homes functions as incentive to move out quickly and gracefully. Homeowners, renters and other occupants residing in the property at the time of foreclosure may receive an offer from the bank. Occupants can negotiate a move out time and the monetary amount with the bank’s real estate agent, or other representative hired to help the bank take possession of the home.
Less Time Equals More Money
Banks offer cash for keys on a voluntary basis. The payment amount is subject to bank discretion and usually negotiable. Typically, the faster a homeowner vacates the property, the more money he gets. The bank considers other factors in addition to the time needed to move out, including the home’s value, its physical condition and the bank’s plan for the property. Banks usually offer between $500 to $5,000 and require that occupants leave the home “broom-swept,” free of debris, and with all fixtures and landscaping intact.
Banks want occupants to vacate a foreclosed property within a certain number of days. An eviction can take between three months and six months and tenants in foreclosure have certain rights protecting them against having to move. Extended occupancy of a foreclosure increases the bank’s overall maintenance costs, therefore, banks pay tenants to move out relatively quickly. Banks also bear the expense of paying security deposits, utility deposits, moving costs and even temporary living expenses for tenants after foreclosure. As a result, paying tenants a lump sum to move out may entail less money and hassle.
Money to Avoid Foreclosure
Banks can also offer homeowners money to avoid foreclosure. They may offer relocation assistance for a short sale — when owners sell for less than the mortgage debt owed — or for a deed-in-lieu of foreclosure. A deed-in-lieu involves transferring ownership to the bank instead of waiting for foreclosure. The amount that banks pay for these alternatives varies and may also be negotiated. Lenders participating in the federal Home Affordable Foreclosure Alternatives program, however, must pay homeowners $3,000 for a short sale or deed-in-lieu.