Written by Charleston Foreclosure Defense Attorney, Kristen G. Pierce
“Cash for keys” may be a good result for some homeowners facing foreclosure. Cash for keys is exactly what it sounds like–the lender gives the homeowner cash in exchange for the keys to the home.
As with many other areas of law, we need to keep the focus on the client’s needs. And that means keeping options open.
Many clients want their mortgage modified so that the payment is affordable. Sometimes, however, that’s just not possible. Maybe the lender isn’t participating in mortgage modification programs, or maybe, even if the lender is, the homeowner’s income is still inadequate to make reduced mortgage payments.
Sometimes you must face reality
And sometimes that reality is that keeping your home is either not possible, or simply not in your best interests. Maybe the payment is too high. Maybe the house is too “underwater”–the house is worth (far) less than what you owe.
In those instances, you need to be willing to explore plan B (or C, or D…).
How much do I get?
It varies from lender to lender. And many won’t even offer this option. But the appeal to lenders is that the homeowner agrees to allow the foreclosure to proceed in exchange for an agreed upon sum of money–cash for keys. The lender will also insist on the home being surrendered in good condition. Both parties get the certainty of their bargain.
The cash allows the homeowner to restart her life–maybe that’s a security deposit and a few months rent. She knows exactly how long she can live in her home, when she must move, and exactly how much money she’ll have to find a rental. All things considered, sometime this isn’t a bad deal at all.
As a practical matter, cash for keys is best done during the defense of the foreclosure when the lender knows (1) you have an attorney, (2) you’ve filed an answer and affirmative defenses, and (3) by actively defending the case you can extend your time in the home. With that, you get leverage to negotiate a better deal.
Cash for keys–in the right case–can be a win/win, but the goal is to maximize your negotiating position to obtain the best result possible.