The subject of “Relocation Assistance,” (more commonly referred to as “cash for keys”) has been something I’ve wanted to write about for some time, but felt that the law and the various lender and government guidelines in place on this issue were not properly defined or implemented yet. With the passage of the HAFA portion of the Government’s HAMP program, and the GSE’s common usage, the practice of cash for keys has been . . . codified, shall we say. So, armed as I am with my usual sweaty-palmed grip on the law, and a few years experience under my belt doing cash for keys, I’ve come up with some guidelines that I think will serve families facing a cash for keys situation. Homeowners in Arizona who have recently been foreclosed on will likely get a knock on the door and a posted notice of some kind, indicating that the home is now under new ownership, and the new owner intends to take possession shortly. Depending upon the new owner, this will usually occur within 10 days. For lenders and processors whose operations are well defined and implemented, the knock and the posted notice can come within 48 hours of the auction sale. If the new owner is a servicing lender or a GSE, it is likely that the person who knocks on your door and posts notices on the home will be a real estate agent. If your home is sold at auction to a direct buyer or investor, anyone could show up ay your door: the county sheriff, an eviction attorney (or one of their “runners”), a real estate agent, or possibly the new owner him or her self. Regardless of who shows up at your door or posts notices on your home, it is imperative that you understand your legal rights. You cannot, under any circumstances, be forced to move out of your home immediately. Arizona law dictates that if you are the owner of a home, and you want the people who are in the home to move out, you must first post a “5 day notice,” which is usually a standard form that indicates that if you do not move out within 5 calendar days, “eviction proceedings,” “forcible detainer actions,” or some-such thing will occur. What that means is that if you don’t move out within 5 days, a petition will be made in court to force you to move out of the home.
Going to eviction court . . .
When the petition to evict you is filed, a court date will be set. This date is usually 14-30 days after the petition is filed. This court date is set in order to determine occupancy rights. The new owner will bring their new deed of trust showing that they own the home. If you appear at the appointed court session, you will be given the ability to state your case for staying in the home. If you are a tenant who was renting from the former owner and you have a valid rental contract and evidence you’ve been paying the lease every month, you may be able to build an effective case for retaining your rights to occupancy of the property. Legal help is advised in this case. If you are the former owner, it is doubtful that you will be able to prevail in court, even with legal help. Unfortunately, my research and experience shows that homeowners who attend eviction court proceedings in an attempt to re-establish ownership of the property itself or to maintain at least occupancy rights have not yet made any significant inroads on this front. They usually end up spending a few thousand dollars for an attorney and end up being forced out later, rather than sooner. If either the former owner or the current occupants do not attend the appointed court hearing, the judge will automatically rule in the owner’s favor, and will grant a forcible detainer action to the owner. This will allow the sheriff to go out to the property, change the locks, and remove any personal property left there. Not good. Also, you now not only have however many months of missed payments and a foreclosure on your record, you now have a forcible eviction on your record. Ouch.
How does “cash for keys” work?
When the new owner or their representative appear on your doorstep and post a notice on the home, they always leave clear directions to contact the representative. In most cases, you are strongly encouraged to contact this person. It is strongly recommended that you or your representative do so, immediately. Avoiding contact with the new owner is not going to win you any favors. Contact them, and see what they’re offering. Chances are, your home was purchased at auction by the foreclosing lender or is now owned by one of the GSEs. If this is the case, there will usually be a “cash for keys” offer made. . . Cash for keys offers made by lenders and GSEs on foreclosed properties generally follow a few simple guidelines: 1.) Money will be offered to vacate the property. 2.) The vacate date must be within 30 days of the original date of the posted notice. 3.) All personal property and/or debris must be removed inside and outside the home. 4.) Money will be delivered on the vacate date only, and only if Item #3 is complete.
How much money are we talking about?
The amount of money offered on a cash for keys deal varies greatly among servicers and GSEs. First, there is usually a formula used to determine an initial cash for keys offer based on the estimated value of the home. Another consideration is the mount of time you are given to vacate. In almost all cases, the faster you move out, the more money you get. As an example, (and this is the average CFK offer in Arizona) an initial offer is usually about $2,000, if you move out within 14 days. If you request the full 30 days, your cash for keys amount drops to approximately $1,300. These are averages for homes that are worth between $100,000 and $200,000 at fair market value.
Take the money and run?
Unless you are a tenant who has a binding rental agreement that is up to date on payments, your chances of retaining possession of a foreclosed home are almost nonexistent. For people facing eviction, and know they can’t fight it, a cash for keys deal can be a life-saver. If you have cash for keys questions, let us know.
*Disclaimer: We DO provide loan counseling services and process short sales for our clients, but we DO NOT charge fees. Please also remember: I am NOT an attorney, and neither do I play one on TV or the Internet. None of my opinions should be construed as specific legal advice. If you need specific legal advice regarding your personal situation, please ask.