Business

Cash-for-keys deals used to persuade foreclosure victims to leave their homes peacefully

Banks are increasingly relying on a unique method of bribing homeowners to vacate a foreclosed property without causing damage to the home. For a few thousand dollars, banks try to persuade foreclosure victims to leave the house without having to be evicted and without ripping out any of the fixtures or making the house uninhabitable. Homeowners who have no other option to save their home can consider this offer from the bank, called a cash-for-keys offer.

Local real estate agents or home inspectors are often the representatives banks hire to offer these types of deals to homeowners. They are not directly affiliated with mortgage companies and do not work for homeowners, so they insert themselves into the foreclosure process as a third party who can help negotiate a deal. Owners will receive a small sum of money, which they can use for moving expenses or a security deposit on a new rental apartment or house, while the bank gets the property free of any improper damage or theft.

Banks are beginning to offer more of these types of deals in response to the “buyer’s revenge” syndrome some foreclosure victims engage in before being evicted from a home. By the time the bailiff enters the house and the bank changes the locks, the former owners may have taken all the appliances, removed the copper pipes for scrap, damaged the walls, dumped hazardous materials into the floors, ripped rugs, or letting pets and animals into the home to cause even more damage. Obviously, houses in this condition are almost unsaleable and will have to be listed on the market with severe defects factored into the sale price.

Banks have therefore realized that it costs them more in lost sales revenue than simply bribing landlords to leave without further hassle. Homes in many markets will remain unoccupied for months, contributing to building deterioration, even without the additional destruction caused by former owners who will soon be evicted. If banks can put a few thousand dollars into the pockets of foreclosure victims in exchange for a house in the best possible condition, then all parties will benefit even slightly.

Destruction of a home after failing to stop foreclosure will not help the former owners or the bank. However, homeowners are usually protected against the consequences of their actions, because banks rarely sue for damage done to the house. They know that foreclosure victims won’t be able to pay judgments anyway, and they’re finding that it costs less to offer a cash-for-keys deal to try to prevent any further damage to their new REO property.

Of course, knowing that banks don’t want damaged homes, homeowners can negotiate a higher payment to get the property back in good shape. While most banks will offer a few hundred dollars, others will pay upwards of a couple thousand to make sure the house isn’t damaged. Obviously, homeowners shouldn’t extort banks for more money to move out, but a fair cash-for-keys deal can benefit both banks and homeowners. Going through the eviction process can be costly and time consuming; both banks and homeowners have something the other can trade for. The banks want a clean property and the owners want an incentive not to take out their frustration on a property that they no longer own.

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