Cash for Keys

With distressed properties accounting for 30 percent of existing-home sales, more real estate professionals are finding a growing part of their job is offering struggling homeowners “cash for keys.”

In the “Cash for Keys” program, homeowners who are facing foreclosure are typically offered $500 to $2,500 if they agree to move out within 30 days (and leave the place clean, too). The program frees homeowners from their obligations while getting a little extra money for moving expenses and avoiding a ruined credit profile from a foreclosure. It also allows the lender to not incur the extra costs of an eviction.

The “Cash for Keys” program is expected to become more mainstream for handling short sales too, not just foreclosures. For example, Bank of America is piloting a program in Florida that pays up to $20,000 to short sellers as well as forgive their loan deficiency.

Banks are looking at offering more incentives to short sales since their losses tend to be far less than a foreclosure. For example, foreclosure properties tend to sell for 40 percent below non-comparable non-distressed properties while short sales tend to sell for 20 percent less.

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