The successful marketing and sale of REO properties in California has been facing numerous challenges. These challenges have resulted in the introduction of the ‘cash for keys’ practice. The California Department of Real Estate (D.R.E) has taken it upon itself to provide general advice and tips touching on this type of solicitation to approved licensees and consumers to avoid legal misunderstandings and violations. Once you are unable to service your mortgage, the lender will most probably take over your home in a foreclosure. The lender assumes responsibility of the property from that moment henceforth. The overall loss reflected in the lender’s book is determined by the time it takes the lender to sell off the property and whether they have to carry out repairs or other forms of maintenance on the REO property or not.
The foreclosure action usually has far-reaching consequences on the original resident owner of the property or the tenants living there since they all face legal eviction. This is unless they have a lease or landlord-tenant agreement that is able to circumvent the foreclosure action legally or any other written agreement between the prior owner/tenant and the new lender/owner that aims to modify or maintain the tenancy.
The cash for keys strategy benefits both the tenant or property owner and the lender. The lender pursues a deal with the tenant that will see the tenant being evicted benefit from cash to cater for their temporary living and moving expenses as well as utility and security deposits. The lender also offers a bonus to the tenant for quick moving. You might be wondering what the lender gains from this arrangement. It is in the interest of the lender to have the tenant vacate the house as soon as possible to avoid the delay brought about by formal proceedings of the legal eviction process. The delay can be anything between 3 to 6 months.
No lender would resist the advantages that come with an expedited tenant vacation process. The tenant gets to leave within a specified number of days. They sweep the house clean, clear all debris from the yard as well as the interior and leave the landscaping and fixtures intact. The tenant then hands over the property keys to the lender. In the Cash for keys arrangement, the amount offered to the tenant is negotiable and varies depending on factors such as the market value of the property, the time that tenant will take to completely vacate the property, its condition and what the lender intends to do with it. Experienced and professional REO agents like Orit Gadish of Gadish Properties provide clients with residential real estate services and market advice.