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When Foreclosure Requires You Move

By Cathy Moran

cash keys Images of Money

When you’ve decided to walk away from a house you can no longer afford, don’t overlook the opportunity to be paid to move out.

The foreclosure crisis brought with it a new phenomenon:  cash for keys.

The  banks who bought the house at foreclosure realized that it is cheaper and more orderly to pay the former owners money to help them move than it is to sue them for possession of the house.

The deal is that the buyer pays the occupants cash to leave, on a schedule, with the property in good order.

Time is money

Typically, the cash incentives are larger the quicker you can move out.  

Perhaps the former owner gets $4000 to be out in 10 days;  $3000 to be out in 3 weeks, and only $2000 if it takes five weeks.

The numbers are made up, but they reflect the cash for keys deals I’ve seen in my bankruptcy practice.

Why pay

Having just paid to buy a house at foreclosure, why do the new owners pay more for possession?  Easy:  it’s cheaper than suing to get possession.

It’s usually faster, too.

Until the actual foreclosure auction, the borrower remains the owner of the house in foreclosure.  The owner is entitled to live there as long as he is the owner. (That’s why I counsel those “walking away” from homes to actually stay put until the foreclosure.)

When ownership changes, the new owner must use the courts to get possession and control of the property.

Even if the buyer holds title, he is not entitled to change the locks or resort to other self-help measures to get the occupants out.  He has to sue in unlawful detainer.

Law suits require an attorney and take time.

Human emotions, shame, regret, victimization, lead to wanton damage to the property.

Cash cures all

Paying cash for keys, that is, for possession of the property, just works better.

Paying the former owners to move out creates a timeline for possession and an incentive to leave the property in good condition.  No smashing the fixtures or digging up the shrubs.

It also solves the frequent problem that the borrower has no resources to fund the move.

Do a deal

If your house has been foreclosed, sit tight.

You will be contacted by someone on behalf of the new owner.  You may get a notice to quit which has contact information on it.  An agent of the new owner may knock on your door.

Open discussions about a cash for keys deal.  The quicker you can move, the more money is usually on the table.

The California realtors group provides a form cash for keys agreement.

If life has given you lemons, at least make a bit of lemonade.

I’ve written more about the California foreclosure process at BankruptcyinBrief.com.

Image courtesy of Flickr and Images of Money.

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Filed Under: Life after bankruptcy, Real property & mortgages

About Cathy Moran

I'm a veteran bankruptcy lawyer and consumer advocate in California's Silicon Valley. I write, teach, and speak in the hopes of expanding understanding of how bankruptcy can make life better in a family's future.

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