Under a Cash for Keys Agreement, a Lawyer Can Help his Client Obtain Enough Funds to Move and Maybe Enough to Start Over in Exchange for Expedited Possession of the Property Subject to the Foreclosure Proceeding
A “cash for Keys” agreement is one where the owner giving up possession of the distressed property in exchange with some money. This is a popular Non-Retention option, especially when there are secondary liens and other potential encumbrances that may get in the way of a Short Sale or a Deed in Lieu which usually require that there be no other liens on the property other than that of the primary lender. Here what is given up is possession in return for a cash payment upon surrender of the keys and broom clean, permanent vacating of the premises with all of the property owner’s belongings so the property is left broom clean. Cash for Keys is a more frequent option exercised at the end of a foreclosure or in the beginning of an eviction when the time for the property owner to leave may be near. However, where this deal is pursued in the beginning of a foreclosure it could result in a higher amount for the property owner, given the additional time that the foreclosure may take given that it only started.
The goals with a Cash for Keys Agreement is to obtain money while it is still possible to obtain in exchange for possession which was going to usually be lost anyway. This is a goal/ strategy when the former homeowner wants to move but does not have the funds with which to do so.
The advantages to an owner who needs to but lacks to resources to move are obvious but often in the beginning of a foreclosure a lender is willing to pay more for a cash for keys agreement which is useful even to those with the money to move who do not wish to stay at the property. The other advantages are that a cash for keys agreement does not have the limitations of other non-retention options in that the only thing that the owner needs to give up are the keys. Here if there are secondary liens which would get in the way of a short sale, a deed in lieu or a modification, such secondary lien would not prevent a cash for keys agreement since it is not contingent on a clean title since the lender will still foreclose.
Nonetheless, the owner does need to give broom free possession and tenants at the property or other conditions where the owner cannot give broom free possession to the lender can get in the way of an agreement for cash for keys.
There is not much to the arrangement other than the owner needs to move out first and upon inspection after the move the lender will pay the homeowner. After the owner delivers possession he wants an agreement that the lender or an agent of the lender will take possession so that the owner is not held liable for conditions despite his lack of culpability.
Our office can help with a Cash for Keys Agreement by helping to negotiate and implement it and see that it was finalized. The ability to move out quickly and completely is important since without that the lender would not feel obligated to pay anything . The owner needs to control the situation at the property to negotiate a deal. We do all that. But more fundamentally the various areas we are engaged in foreclosure litigation, bankruptcy and negotiations, give us the additional leverage to pursue good deals. Also we need to determine what are our options and if this area is chosen how to implement that though the challenges.