Monday, April 20, 2009

Getting paid to leave your home

By the time David Benham's company knocks on a front door, the owners inside are no longer the owners. They've gone through the pain of losing a home - the missed payments, the negotiating with lenders, the realization that it's not going to work. Benham is there to collect the keys.

He also is delivering a check.

Cash for moving out of a foreclosed home? The practice - called "cash for keys" - has been happening for years, but never as much as now, with home values plummeting across the country and banks trying to avoid long and sometimes costly evictions.

Benham and his identical twin Jason are the founders of Benham Real Estate Group, with 71 offices across the country, including Concord. His office does 15-20 cash for key negotiations a month in the Charlotte area alone.

"It's just a form of eviction," he says. "It's a quick eviction."

It happens like this: After a foreclosed house is bought back by a bank, the "asset" is e-mailed to brokers like Benham. "If it's occupied, the first thing the bank wants me to do is offer a cash for keys," he says.

In Charlotte, Benham's staffers contact the former homeowner with an offer of $500 to move out in two weeks. The offer can go up if the former homeowner haggles - "I can't do it in two weeks" usually is followed by "Can you do it in two weeks for $1,000?" - but most don't know it's a negotation. "No one ever turns the money down," Benham says.

Banks will pay as much as $1,500 for a cash for keys transactions in Charlotte. In other areas of the country, where home values are dropping more quickly, banks pay as much as $4,500 to $6,000. One of Benham's colleagues, in California, delivered a $40,000 check on a foreclosed $4 million home.

Usually, Benham says, the former homeowners are happy to be getting even a small check in exchange for their keys. Occasionally, but not often, the homeowners haven't completed their end of the transaction - having all their belongings off the property in the two weeks. Most, however, seem glad to have it over.

Benham, along with many industry observers, doesn't expect his business to slow anytime soon. When the recent bank moratorium on foreclosures expired earlier this month, there were more than 600,000 foreclosed properties around the country. With home values continuing to fall and the economy still sputtering, that number will likely spike, despite the Obama administration's housing-rescue plans.

"You could see 1.5 million by the end of the year," he says. "There are going to be more foreclosures than you can imagine."


Rebecca said...

UGH. Who goes into that line of "work."

Anonymous said...

a co-worker got cash for her keys - she had been paying rent to her landlord and landlord was in turn not paying mortgage so it worked out for her so her and her family could relocate and was a way of getting her deposit back that she had paid.

Real Estate Agent said...

I am fan of the "cash for keys" practice. Sometimes the homeowners take way too long to move out and it's loosing you more and more money than giving them the money before hand and being sure they leave the house in two weeks. It serves perfectly for both sides. People who get the cash are always more than happy to accept it. Nicely written article by the way,

take care, Elli

Jurate said...

Read the Fine Print, Then Read It Again, Then Have 2 More People Read It

I was offered "cash for keys" for my home, which I owned with my mother. She passed, and the bank wouldn't allow me to make payments, since the mortgage was in her name. It foreclosed, and Bank of America (the servicer on our Freddie Mac loan) finally agreed to talk with me 2 days before the redemption expiration, and only because my state counselor had a contact at FM and they FORCED BoA to talk to me.

3 extensions and a ridiculous loan mod offer later, I am waiting for that eviction hearing notice. Packing up my things, and moving.

Back in January, I was willing to take on the outstanding principle, which was 2.25 times the SEV (SEV is what *turnkey* homes are selling for here). No, they wanted to tack on almost $30K in fees (fees that wouldn't be there if they would have talked to me from the get go). That would have bumped the mortgage up to 3 times the SEV!

So, they make me a "relocation offer" (cash for keys). I was ecstatic to find I could get $4K if I could move within a month!! I was seriously considering it. But then I read the contract more closely.

I had been honest with them from the get-go and told them I had gutted the house, and it was in various states of construction. In addition, there was known roof damage that would need to be repaired this spring. The contract stated that the house must be left in "normal wear-and-tear" condition. Huh? They knew darned well the state of the house. I called the lawyers who made the offer. They weren't much help. I read the contract again. The phrase " . . . and I agree to be personally liable for any repairs above and beyond normal wear and tear, including but not limited to the roof . . . " jumped off the page.

So let me get this straight. You want me to agree to make the repairs on the house in return for $4K?? Are you KIDDING me? ARE YOU KIDDING ME?? What kind of moron do you think I am?

So, in addition to making my life hell in my grief, and making it impossible (for any sane person) to keep my home, BoA has screwed themselves (and Freddie Mac and the American taxpayers) out of the opportunity to at least break even on this house. The outstanding principle was $119K, the SEV $50K, and they will be lucky to get $30-40K because the house needs so much work.

How is that good for anyone? In hindsight, actually, it is very good for me. I can walk away knowing that I tried to do the right thing, and go on to buy a house that won't be thrice upside down. Maybe even this one. I think I can get financed for $40K.

Anonymous said...

Bank of america took over my fathers morgate from country wide same treated my father passed away and although the house was left to me in the will they would not even speak to me I would have paid from the begging had they worked something reasonable out but instead they shut me out and four years later they haven't gotten a dime due to their ignorance and greed for them and there wall street friends the house went to auction was not even five min long two guys showed up in suits handed over an envelope full of cash and walked away without bidding then boa "bought it back" apparently from themselves even though I asked for the title/deed they said 48hours I would get a copy threw fax 6 months letter they faxed over a note saying they were no longer handling the matter but yet they bought and sold to boa now the house was auctioned end of nov and they offered 5k to be out by the end of jan or take it to court which would take about 6 months weighing my options but I want to make sure the title/deed wasn't fraud before I walk away from my life my home and the place my dad took his life in shame of debt the morgate company knowingly sold my dad a morgate that would never work out its pathetic and something needs to be done the banks won't rent but when they own every house and won't give morgates where are all of us families that have been destroyed suppose to go?