What’s “Cash for Keys” in a Foreclosure?

If you lose your home to a foreclosure sale, the new owner might offer you a lump-sum of money to voluntarily move out. This kind of transaction is called 鈥渃ash for keys.鈥

People who go through a foreclosure can do a remarkable amount of damage to a house if they think the process was unfair or that the new owner is being unreasonable. Also, the legal process to evict someone from a foreclosed property is often costly and time-consuming.

So, to incentivize the former homeowners to move out peacefully and voluntarily, the new owner鈥攗sually the bank that foreclosed鈥攕ometimes offers them a lump-sum of money. This type of transaction is called a 鈥渃ash-for-keys鈥 deal.

How Cash-for-Keys Deals Work

A cash-for-keys arrangement often works like this: After your legal right to live in the home ends鈥攚hether that’s shortly after the sale or at the end of a redemption period鈥攜ou鈥檒l receive a letter from the new owner (usually the bank), or someone acting on the new owner’s behalf, offering you a lump-sum of money. Typically, the amount will be a few hundred to a few thousand dollars.

In exchange for the funds, you鈥檒l have to agree to vacate the home by a set deadline. You鈥檒l also have to leave the property in 鈥渂room swept鈥 or 鈥渂room clean鈥 condition, which means you鈥檝e cleaned up the place, didn鈥檛 vandalize anything, didn鈥檛 leave garbage behind, and didn鈥檛 strip the home of fixtures, like appliances, lights, or copper wiring.

If you move out by the deadline and leave the property in satisfactory condition, then you鈥檒l get the money. You’ll likely have to agree to a final inspection where you鈥檒l hand over the keys and get a check. The money you get is intended to pay for your relocation costs.

Your Likelihood of Getting a Cash-for-Keys Deal

Cash-for-keys agreements are commonly offered following foreclosures and during evictions, and sometimes as part of a deed in lieu of foreclosure agreement. You鈥檙e more likely to get this kind of offer if the bank is the buyer at the foreclosure sale and the property becomes REO. Having a cash-for-keys policy is a standard procedure with many foreclosing banks.

If a third party buys the home at the foreclosure sale and doesn鈥檛 offer you a cash-for-keys deal, you should consider proposing one. You鈥檒l have to move out eventually anyway, and you might as well try to get some money to soften the blow.

Negotiating a Cash-for-Keys Deal

For the new owner, providing a cash-for-keys deal is usually faster and much cheaper than pursuing an eviction and possibly having to fix up a damaged property after the disgruntled homeowner moves out. So, if the new owner offers you money to leave, but you think it鈥檚 unfairly low, you can ask for a higher amount.

Though, don鈥檛 get greedy. You shouldn’t ask for more than what you reasonably believe you鈥檒l need to relocate. If you ask for too much, the bank or another new owner might withdraw the offer.

Talk to an Attorney

If you鈥檙e not comfortable negotiating a cash-for-keys deal on your own鈥攐r you have questions about how long you can legally live in the property鈥攃onsider talking to a foreclosure lawyer. An attorney can tell you about your options before and after a foreclosure sale, inform you about foreclosure procedures in your state, and help you work out a cash-for-keys deal to help cover your relocation costs.