Foreclosure: Cash For Keys
We’re writing a lot about foreclosures in June. “Cash for keys” describes a transaction that’s related.
When a lender wants a borrower or tenant out of the property, for whatever reason, the borrower may offer a cash payment.
The lender isn’t obligated to make the payment to the occupant, but sometimes it’s necessary in order to get them out before it’s damaged. And sometimes that damage can be much more costly than a cash payment.
The payment is typically a few thousand dollars. I’ve seen upwards of $50,000 when a high-value home was involved. Usually, the money is paid half upfront, and the remaining half once the lender confirms the condition of the house is acceptable once the occupant vacates. The borrower or tenant typically uses these funds for expenses related to relocating, including getting a moving truck and maybe their first and last month’s rent in a new place.
There are benefits to both the lender and the borrower in a deed in lieu transaction. When exercising a deed in lieu of cash for keys can be a great way to ensure the home isn’t destroyed when the borrower vacates.
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