When you’re going through a foreclosure, your home is sold out from under you, often with you still in it. The new owner will want you to move out as soon as possible. The good news is that they may actually pay you to leave. With Cash for Keys, California has set up a system to help make the foreclosure process easier for both parties.
Get Paid To Get Out
After a home is sold at foreclosure, the biggest obstacle for the new owner can be getting the occupants of the property to leave. In some cases, the occupant may be the previous owner, and in others, it may be a tenant. Regardless, many banks as new owners will use a mechanism known as “cash for keys” to quickly and effectively get the occupants to vacate the property. It involves paying the current occupant a specified sum of money in exchange for the occupant completely vacating the property within a certain time frame, maintaining the property until that time, leaving the property in a clean and “broom swept” condition, leaving all appliances, and ultimately turning all keys and any garage door openers over to the new owner or its agent in the manner agreed upon.
Generally speaking, when a new owner acquires a property through foreclosure and that property is occupied, a cash for keys offer can be a good solution for everyone concerned. You, as the occupant, should approach the new owner or its authorized agent about whether a cash for keys agreement is feasible. Keep in mind that if the new owner does make you an offer, the amount and time frame are negotiable. The more quickly you can vacate the property, the more money you are likely to get. You should consider the following factors when deciding whether to enter into a cash for keys agreement:
- What is a realistic time frame to locate new accommodations, pack, and move?
- What expenses will you incur in leaving your current property?
- Will you have to pay for a storage facility, a moving van, or a security deposit on a new place and first and last month’s rent?
- Will you be required to stay in a hotel temporarily while you find new accommodations?
The amount a bank is willing to pay depends on several factors as well, such as the value and condition of the property, how long the bank anticipates it will take to sell the property, and the amount of time it will take for you to vacate. Therefore, you can expect that any cash for keys offer may fall anywhere from $500 to $5000. Make sure to review your cash for keys agreement once it’s reduced to writing to make sure it contains all of the terms you expected and discussed.
Cash for Keys in California
Laws vary from state to state and even between cities on tenants’ rights. For example, in California, cities such as Los Angeles have enacted local ordinances to offer greater protections to tenants facing eviction. For example, pursuant to Los Angeles Municipal Code Ch. IV, art. 14.1, §49.92, good cause is required to evict from a rent-controlled property. Foreclosure does not qualify as good cause under this code. Additionally, Los Angeles has enacted an ordinance that temporarily extends this protection to non-rent controlled properties as well. The good cause ordinance is, however, set to expire on December 31, 2015 unless the City Council acts by ordinance to amend it to extend the effective period. This means that if you are a tenant with a lease, a new owner of a foreclosed property cannot simply evict you, make a cash for keys offer, and be done with it. Depending on your type of lease, you may be able to remain in the property the full term of your lease. Additionally, new owners need to comply with all notice requirements. If you are the former owner, while your rights may not be as extensive as a tenant’s, you are entitled to notice and an eviction process.
In California, there are also laws that govern who can make an offer of cash for keys on behalf of the new owner. Under §10131 of the state’s Business and Professions Code, those involved in soliciting a tenant to enter into a cash for keys agreement on behalf of an owner and/or a lender or its servicer must be a real estate broker or real estate salesperson operating under the supervision of a real estate broker. However, there is an exception to this provision if the exchange of money for collecting keys is purely ministerial.
If you, as the occupant, are negotiating a cash for keys settlement with a licensed real estate professional on behalf of the bank/servicer and/or new owner, know that the real estate professional has specific obligations: Upon request, the real estate licensee must identify him/herself to the resident owner or tenant and provide his or her DRE (department of real estate) license number so that they can be verified.
Pre-Foreclosure Cash For Keys
In certain circumstances in California, if your home is in default and you have been notified by your lender that foreclosure proceedings are imminent, a deed in lieu may be an alternative to letting the home go through foreclosure. If your lender agrees to a deed in lieu of foreclosure, then under HUD standards, you could be entitled to a cash for keys settlement up to $2,000 once you vacate the property. Negotiating and effectively executing a deed in lieu is a complex undertaking. If this is an option you wish to explore, you should consider consulting with a real estate attorney who specializes in pre- and post-foreclosure issues. This will ensure that you have all of the facts before you decide whether to pursue this option. It will also ensure that you are adequately represented in negotiating a cash for keys offer in conjunction with the deed in lieu.
Are you facing foreclosure?
If the home that you own or rent is facing foreclosure, you have rights. In California, the law governs how and when you may be evicted and protects you from being thrown out into the street. If you’re facing foreclosure, contact one of our experienced local attorneys as soon as possible for a free consultation to learn more about your options and about the foreclosure process. There are ways to stop a foreclosure proceeding, including filing a bankruptcy. We can also help you determine if a cash for keys agreement is right for you and help you negotiate the terms you need. Foreclosure is never easy, but we can help.