A cash for keys offer is a deal which a bank may make with a homeowner, in which the homeowner is given a cash settlement in exchange for vacating his or her foreclosed home. This type of arrangement is sometimes made to renters, too. The advantage, from the point of view of the bank, is that it gets people out of the house quickly, and the house is often left in better condition than it would be in the event that an eviction was needed. It is important for people to be aware that this type of offer is usually a last resort, however, because once the paperwork is signed, the homeowner or tenant typically has no recourse.
In a classic example, the bank will initiate the foreclosure process on a home, and indicate that it is willing to pay the homeowner a set amount of cash in exchange for the keys. The cash may be based on a percentage of the appraised value of the home, or it may simply be a static payment. If the homeowner accepts, ownership of the home reverts to the bank, and a moving date is set. The time for the homeowner to negotiate is when the offer is made; if the homeowner feels that the offer is unfair, she should say so and she may be able to get a better deal, since the bank just wants her out of the home.
In the case of renters, some banks offer tenants cash for keys when they foreclose on a home to compensate the renters for their trouble. The settlement can be used to help with moving expenses, and it is also designed to keep the renters from complaining. For tenants, foreclosure can be extremely frustrating, because they may not be aware that the foreclosure process has begun, let alone proceeded to the point where they are expected to vacate a home.
Without voluntary surrender of the keys to a home, banks face a lengthy eviction process. Running an eviction is expensive and time consuming, because while eviction notices are served and the eviction is finally enforced, the house is simply sitting there, and the bank cannot put it on the market. By getting a so-called “broom clean” house in exchange for a small cash settlement, the bank can quickly turn it around; most banks do not like to hold on to a real estate inventory, so they welcome the opportunity to sell off their foreclosed properties.
In addition to helping banks cover their losses quickly, cash for keys can also prevent damage to the house. In some cases, people who are evicted feel resentful and angry, and they may stop maintaining the house or actively damage it out of spite. As a result, a bank might need to invest in some basic repairs to make a house salable before putting it on the market, and this eats up more time and money.