Cash For Keys…How I Have Such a Huge Close Rate

Cash For Keys…How I Have Such a Huge Close Rate

In a previous article I discussed the theory and mechanics of a typical Cash For Keys program.  In this article I am planning on sharing how I have tweaked my presentation to the point where I have obtained signatures and successful move-outs on 100% my last 5 presentations in Hemet CA REO properties – whereas prior to my adjustment I was only delivering checks to about half of the homes that were occupied when we did our initial occupancy check.

STEP 1 – Attitude

The first step is to check my attitude.  I am normally an aggressive person, one who lives in the moment and demands instant gratification…OK, I may not be that extreme, but I need to check my attitude.

It is very important when making contact that I am humble.  I have to remind myself that I am not here to cause anyone any grief or to be a bully, but to offer an amicable solution to what may be a very bad situation.  After all my job as a REALTOR® is to put people into Hemet homes, not ask them to leave.

STEP 2 – The Approach

Now I may or may not have had a previous contact when I made my occupancy check.  Then again, another team member may have been the one to do the occupancy check, so I am more than likely a stranger.

Again, I may have spoken on the phone (read my article on the occupancy check) and actually set the appointment – perhaps even in my office, which is the most preferred environment for me (not to mention time effective).

If I am meeting at the property, unannounced, I will use the same precautions as I discussed in my Occupancy Check article.  If I am in the office, I have a professional environment that I use, making them feel comfortable yet establishing me as the authority figure.  In each case I have a file with me – again for the position of authority.

Now it has been suggested in previous articles from my readers that they do what they can to save time and combine the occupancy check with the Cash for Keys presentation.  I have even read where an agent simply leaves the paperwork at the door and does not bother making additional contact.

First, my clients do not authorize a Cash for Keys arrangement until AFTER I report back to them that the property is still occupied.  As far as leaving paperwork behind, I tried it with my first tow Cash for Key situations and neither one responded, at all.

If I am working without an appointment, then I will attempt contact daily, at different hours of the day until I am certain someone is home and either talks to me or I am certain I am being ignored at the door.  It is my job to be diligent, and I take this responsibility very seriously as there are huge implications for everyone involved if I minimize this task.

STEP 3 – The Introduction

I always introduce myself first as a REALTOR® who has been asked by the bank to list and sell this property.  I will confirm that I am at the right home and speaking with the right people (as per Title).  I let them know this is as awkward for me as it is for them, but to please understand that I have no prior knowledge of their situation, as I have only been assigned this listing in the last day or two.

I’ll ask if they are aware that the home was foreclosed on and taken back when no one bought it on the courthouse steps – the lender is now the legal owner of the property and that the occupant has no legal right to be there.

By this point, there will be a reaction – one that varies from denial to breaking down in tears and sharing their hard luck story.  In any event, I want to gather as much useful information as possible – and to be honest I have no idea what will be useful and what won’t – so I take my time and listen.  Whatever you do at this point – NEVER TAKE WRITTEN NOTES unless you want to shut them up and put a major barrier between the two of you.

The objective of this step is to get inside and sit down at the kitchen table, in the Hemet CA REO listing.  I’ll say something like, “I understand this is a very difficult time and believe me, I have empathy for you – not long ago I was facing similar circumstances of my own.  If I can come inside to talk for a few minutes, I’ll explain a little bit about what happened to me and how you can gain from my experience.  On top of that, I have a solution that I believe can make this time a little less stressful for you.”

STEP 4 – Get Comfortable & Build Rapport

I have found that if I rush through a Cash for Keys agreement that the likelihood of it finalizing are minimized.  It is important that I take my time, say the same way I would in a retail listing presentation.  It is very important to establish trust and rapport.  After all, I am a local REALTOR® and everyone knows we sell houses, we don’t evict people.

If needed, I’ll discuss a little bit about my personal situation including sharing about my wife who is at home with cancer.  The bottom line is I am not looking for sympathy but a way to establish empathy (although I do accept prayer from anyone willing to give it to the Lord on my wife’s behalf).  The moral is that life happens and it is not something we often have control over – no matter how well we planned for our future.

In sharing my story, it really does a good job of minimizing the significance of their story, yet I always make what they are going through more disheartening than my own dilemma.  It’s all about rapport.

Step 5 – The Offer

Once I am comfortable in the home and they are comfortable with me, I’ll explain that the bank has authorized me to offer them some money, based on some very specific terms.

By now, I will have established that they have not paid a mortgage payment or any rent for the last 7 or more months and that they have funds available to move.  They don’t always, but I need to know where they are financially – or get as good a picture as I can.  I’ll even let them know I have some property management contacts in the area they want to move to, and ask if I can be of any assistance (cha-ching, did I just earn a referral fee?).

Many times they know where they want to move and may already have a place lined up.

I will share that having a foreclosure on their credit report does not carry the same stigma it might have just a few years ago.  I start to joke and say that the social stigma is gone and in some circles is even considered a financial coup.  If the family took cash out, I’ll suggest people will be at a party asking one another how much they made on their foreclosure, in the form of a Home Equity Line of Credit or other cash out refinance.  If it is not a cash out scenario, I may use other recent social stigmas that are politically correct today.  For example, I’ll say, “Do you remember when it is taboo for a racially mixed couple to marry and have kids?  Or how about an unwed mother – man, that was so far off the charts when I was growing up and now even my own daughter has a 14 year old and never been married.  What was once unacceptable behavior by society has become commonplace and acceptable.  Now I’m not advocating if this is right or wrong, but it is the norm – and right now losing your home to foreclosure is not an uncommon event and nothing to be ashamed of.  After all, you got caught in a changing market where you could not follow the advise of the people who made a lot of money on you, telling you you could refinance into a lower payment and take out even more equity.”

I’ll continue, “If it makes you feel any better, many of the people who advised you on your loan are not only out of business today but have lost their own homes.  I personally know of many lenders and REALTORS® who have already lost their home and many more on the verge.”

I’ll then go into the close, presenting the offer as outlined by the lender.  Each lender has their own agreement and terms.  I like to read the entire document out loud and stop after each paragraph to make sure there is complete understanding of what is expected.

STEP 6 – The 1-2 Punch

In some situations; the former homeowner is still reluctant to leave.  Apparently there is a segment of our society earning a living advising people how they can procrastinate the foreclosure process and stay in their home for a year or more without making a payment. 

I’m not saying it can’t be done as I have seen it happen…but at what cost?

First, remember whoever is offering this great advice has their hand in the homeowners back pocket – making a quick and slimy buck.

So now I’ll reiterate the commonality of foreclosures on credit reports and how families that have recently lost their home, but otherwise have good credit make ideal tenants.  The families are, for the most part, responsible with their finances and have decent jobs – otherwise they wouldn’t have qualified for the home in the first place.

I’ll explain again how desirable a tenant they are to investors who are terrified of losing their own investment portfolio.  I’ll then tell them that if the bank has to evict them from their home that they will be on the lowest level of credit risk for landlords and that it may be near impossible to rent again for many years.

I’ll ask, “After all, losing your home to the bank because your payment went up several hundred dollars every month and the value of your home dropped 2 or 3 percent a month cannot be held against you.  So you lost your house, like a million other families in the country.  However, most of those families were responsible enough to move on prior to the foreclosure date.  They may have been angry at a lot of things, but they did not have s sense of unjustified entitlement – meaning they did not act like anyone owned them anything after living for free for 7 months.

If you were a landlord and you had a choice of renting to two different families who both lost their home to foreclosure and everything else was equal, except one family moved out on their own and the other had to be dragged out by the sheriff…which do you think you would prefer as a tenant in your investment worth hundreds of thousands of hard earned dollars?”

Of course they have only one answer that makes sense.

Trust me, no one wants an eviction on their record; especially immediately following a foreclosure.  By this time they sign the papers…

STEP 7 – The Initial Inspection

Now I’ll ask for a quick tour of the property.  I let them know I need to take some preliminary photos to document the condition of the property.  Now, I’ll explain as we go through each room what I expect to find when I return; i.e. ceiling fans, outlet covers, appliances, plumbing fixtures, etc.  I’ll make comments like “I know you would never do this, but please don’t get mad at the house and start punching holes in the wall – because I would have to hold back your money.

While inspecting, I am still building rapport.  Commenting on items in the home that they are proud of or finding a link that I can connect to, just as I would in any other real estate situation.

I’ll take at least 2 pictures of each room – if there is any damage, I will document it and ask them to show it to me, as I don’t want to hold them accountable for anything that is pre-existing to my visit.

This is a critical step to the final transfer of the property.  Again, I am working on my personal relationship with them and giving them very specific guidelines of what I am expecting.  I am allowing them to ask as many questions as they want.

Perhaps the most common question at this point is what about a specific item they had purchased and installed, such as a ceiling fan.  I say take it with you if it means that much to you – just please remember to replace it with an acceptable replacement.  It does not have to be another ceiling fan, but at least a basic light.  You will not get your check if there is nothing there.”

STEP 8 – The Final Inspection

Contact is made the day prior to move out.  A set time is established.

We have just changed our internal process.  Up to this point, I had gone back to do the inspection and then called for the locks to be changed.  Now my contractor, who takes care of all my work, has told me repeatedly that I have been too soft – perhaps I have because I know all about these people and their stories.  At this time, I no longer want to hear more sob on top of what I have already learned.  Now it has to be the bank first.

So, since my contractor shows up anyway to change the locks – he will now be conducting the final inspection.  After all, if there is 10 gallons of paint left in the garage, he’ll be the guy that has to dispose of it.  And since the banks just paid good money to make sure the property was left broom clean, we certainly don’t want to submit an invoice to the bank for additional hauling.  So in this case if they want their check, they have to take the paint with them

Well there you have it – a clear understanding of what is involved in most cash for key transactions.  They are one of the least pleasant aspects of being a successful REO Agent – but a critically important one.

Next time, I’ll be discussing the steps that we take when first taking possession of a REO property – whether it’s a cash for keys transfer or a new assignment of a vacant home – not much difference.

Blessings to all who read, 

John Occhi, REALTOR®
The REO Team at Mission Grove Realty, Inc.
Hemet, CA  92544
www.RepoAndForeclosure.Com
(888) 540-7243

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