The cash for keys program has been around for many years but kept quiet by the banks until the sub-prime mortgage meltdown in 2007 forced many banks to initiate the cash for keys policy as standard procedure.
Two big problems banks face when taking a home in a foreclosure or short sale are, the condition of the home after it's occupants vacate, and getting the occupants to leave in a timely manner after the home sells. By giving cash for keys the homeowners are more likely to vacate in a timely manor and leave the property in better condition. By offering this incentive it encourages homeowners to do a short sale which ends up benefiting the bank as well as the homeowners.
The amount of cash the bank gives varies. However, It's usually between $2,500 and $3,500 but the average cash for keys is $2,500. I realize in the grand scheme of things that $2,500 bucks is not that much especially since just a few year ago your home was worth so much more.
A few things to keep in mind:
- By doing a short sale the bank cannot go after you on a 1st mortgage (federal law)
- If you qualify for HAFA the bank cannot go after you on a 2nd mortgage
- Short Sale = $2,500. Foreclosure = a big fat ZERO!!
- With a Foreclosure the bank can go after you for the entire amount owed
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