According to RealtyTrac, the rate of American foreclosure filings increased by 4 percent from June 2011 to July 2011. In July 2011, RealtyTrac says one in every 611 homes received a foreclosure filing. Many of these properties had renters as tenants, who have dwelling rights that extend beyond the foreclosure. Cash for keys is an incentive for those tenants to give up their rights and leave early.
Cash for Keys
Cash for keys is a procedure where the new owner of a foreclosed property, most often a bank, offers money to the current tenants in exchange for a signed waiver and the home in move-out condition. In participating with cash for keys, the tenants give up certain rights in exchange for the payments. This practice has been around for many years, but it’s become more common since the downturn in the real estate industry that began in the mid 2000s.
Cash for keys benefits both the new owner of the property and the current tenants. Obviously, the tenant receives cash to assist in the moving out. The new owner of the property receives a vacant property earlier than required by law and a guarantee that it won’t be damaged when the tenant turns over the keys.
What If There’s a Renter?
According to the Protecting Tenants at Foreclosure Act of 2009, if you’re a renter in a property that goes through foreclosure, you have the right to finish out the terms of the lease you had in place with the old owner. If you were on a month-to-month lease with the previous owner, the new owner must give you a 90-day notice to vacate the property. If you sign a cash for keys agreement, you are giving up those rights in exchange for the money being offered.
If you are presented with a cash for keys agreement, take some precautions to avoid accidentally giving up your rights. Verify that the agreement is from an authorized representative of the new owner. For example, if it’s a bank, you can just call to verify that the bank now owns the property and the person you’re dealing with is authorized to make the offer. Read the agreement carefully to understand the condition the property must be left in to receive the money and think hard about whether you can meet those conditions. Make sure you can find a new place to live in, in the time being specified on the agreement. Consider contacting a legal representative to look over the agreement to make sure you understand what you’re giving up in exchange for a cash settlement.