How to Get Cash for Keys for Your Bank Foreclosure

Cash for keys is an incentive program for the homeowner to vacate the property.

The American housing market was caught in a vicious foreclosure cycle after the mortgage crisis began in 2007. As more people lost homes, foreclosures spiked and property values plummeted, causing more to consider foreclosure as a viable option in a tough economy. By mid-2011, the first drop in the number of foreclosed homes occurred, according to "The New York Times." In an effort to slow foreclosure's momentum, lenders often give homeowners incentives to move on and cut their losses. Cash for keys is an exchange program between the lender and the foreclosed, which millions of distressed homeowners may benefit from.

Things You'll Need

• Cash-for-keys contract provided by the lender

Instructions

1. Contact a nonprofit housing counselor approved by the Department of Housing and Urban Development. He can help you negotiate the terms of a cash-for-keys contract with your lender or servicing company free of charge. Find one in your area by visiting the HUD website.

2. Consider your options when negotiating with the lender on the amount of cash for keys and the time frame you have to move out. Generally, the sooner you agree to be out of the house, the more money you receive. Be realistic when determining how quickly you can move. Failure to meet the deadline jeopardizes the contract: You may end up evicted and without cash.

3. Sign the lender's cash-for-keys contract and start moving. You may leave sooner than the agreed-upon date, but you must meet all terms and conditions to receive payment. Review the contract for provisions regarding the property's condition upon moving out. Generally, you're required to leave the home with all fixtures, such as stoves and lighting, in place. You must also leave it free of personal property and debris.

4. Surrender all keys, including those used for mailboxes and common areas, as well as garage door openers. The lender likely changes the locks right away, but you must still turn these items in to make access easier and to reassure the lender you won't reenter the property.

5. Collect your cash payment from the lender's representative at the property or a specified location. If you complied with all aspects of the contract, lender must pay you the full amount.

Tips & Warnings

• Your lender may offer a seller incentive, similar to cash for keys, upon settlement of a short-sale transaction. Cash for keys generally applies to foreclosures and deeds in lieu of foreclosure, whereby the homeowner deeds the home back to the lender.

• Tenants in a foreclosed property may also receive cash for keys if the owner has abandoned the property. Generally, a homeowner not occupying a home at the time of foreclosure isn't offered and can't receive cash for keys.

• You may have to pay taxes on the cash you receive. This incentive may also affect your bankruptcy eligibility. Consult with a tax professional or attorney to find out how cash for keys affects your finances in these situations.

References

• CNN Money: Treasury Dept. Is Giving "Cash-for-Keys"
• Serving San Diego County: Cash for Keys --- What Is It and Where Do I Get It?
• Foreclosure Business News: Cash for Keys Program --- If You're in Foreclosure and Have Filed Bankruptcy, What You Need to Know
• Homeownership.org: Foreclosure Help for Homeowners

Resources

• HUD: HUD Approved Housing Counseling Agencies