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Foreclosure processBank-owned (REO)

Cash for Keys

Also called Relocation assistance, Cash-for-keys agreement

In short

Cash for keys is a payment a lender or new owner offers to occupants of a foreclosed property in exchange for moving out by a set date and leaving the home in agreed condition, avoiding eviction.

Who offers it
The lender or new owner
Who receives it
Former owners or tenants
Typical conditions
Move-out date, broom-clean, no damage
Alternative to
A formal eviction

Where it fits in a foreclosure

Cash for Keys belongs to the bank-owned (reo) stage.

  1. 1Missed paymentsThe owner falls behind; the servicer sends notices and may offer workout options.
  2. 2Pre-foreclosureA notice of default or lis pendens is filed. The owner can still sell, catch up or negotiate.
  3. 3AuctionThe property goes to a public sale, usually for cash, as-is and often without an inspection.
  4. 4Bank-owned (REO)If no one outbids the lender, it takes the property back, clears most title issues and lists it.You are here
  5. 5ResaleA buyer or investor purchases, repairs and occupies, rents or resells the home.

How cash for keys works

After a foreclosure auction or when a property becomes bank-owned, the new owner may find people still living there. Instead of filing for eviction, the owner offers a payment if the occupants leave by a specific date, remove their belongings, leave the home in reasonable condition and hand over the keys. Payment is made at move-out, after a walk-through.

Why owners use it

Evictions take time and money, and the timeline varies by state and court backlog. Paying occupants to leave voluntarily is often faster and cheaper, and it reduces the risk of damage to the property. Amounts vary widely depending on the market, the occupant's situation and the cost of an eviction.

Tenants have rights

If the occupants are tenants rather than the former owner, federal law generally gives bona fide tenants at least 90 days' notice to vacate after a foreclosure, and some states and cities add more protection, including honoring existing leases. A cash-for-keys offer cannot be used to pressure tenants to give up these rights. Put any agreement in writing and consult a local attorney.

Example

Cash for keys vs. eviction

An investor buys a home at auction, and the former owner is still living there. A local attorney estimates an eviction would cost about $2,500 and take two to three months, during which the investor pays $1,800 a month in holding costs. The investor instead offers $3,000 if the owner leaves within 30 days, broom-clean. The owner accepts, and the investor starts repairs two months earlier than expected.

Frequently Asked Questions

Related terms

REO / Bank-Owned PropertyForeclosure processAn REO (real estate owned) or bank-owned property is a home a lender took back after it failed to sell at foreclosure auction. The lender then sells it, usually through a real estate agent.Foreclosure AuctionForeclosure processA foreclosure auction is the public sale of a property after a borrower defaults, where the highest bidder buys it, usually with cash and as-is. If no one outbids the lender, it becomes bank-owned.Deed in Lieu of ForeclosureForeclosure processA deed in lieu of foreclosure is an agreement in which a borrower voluntarily transfers ownership of a home to the lender to settle the mortgage and avoid the foreclosure process.Zombie PropertyForeclosure processA zombie property is a home the owner has vacated during foreclosure, but where the lender has not completed the foreclosure, leaving it empty with the original owner still holding title.ForeclosureForeclosure processForeclosure is the legal process a lender uses to take back and sell a property after the borrower stops making mortgage payments, so the lender can recover what it is owed.Right of RedemptionForeclosure processA right of redemption lets a foreclosed homeowner reclaim the property by paying the full amount owed, either before the foreclosure sale or, in some states, for a set period after it.As-Is SaleBuying & closingAn as-is sale means the seller will not make repairs or offer credits for the property's condition. The buyer accepts the home in its current state, though inspection rights and required disclosures may still apply.Short SaleForeclosure processA short sale is the sale of a home for less than the amount owed on its mortgage, with the lender's approval. The lender agrees to accept the reduced proceeds to avoid a foreclosure.

Learn more in the knowledge base

After You Win a Foreclosure Auction: Closing, Title and PossessionGuide · 7 min readWinning the bid starts the purchase rather than finishing it. This guide walks through paying the balance, receiving and recording a trustee's or sheriff's deed, getting title insurance after the sale, living with a redemption period, lawfully gaining possession of an occupied home and securing the property once it is yours.Researching a Foreclosure Property Before the AuctionGuide · 6 min readAt a foreclosure auction you usually buy as-is, unseen and without contingencies, so research done before the sale is your only protection. This guide covers how to confirm the sale details, check title and liens, estimate value and repairs from the outside and turn it all into a maximum bid.What Is a Bank-Owned (REO) Property? A Buyer's OverviewGuide · 6 min readA bank-owned, or REO, property is a home the lender took back after a foreclosure auction failed to attract a high enough bid. Lenders usually clear title and list these homes through agents, which makes them the most accessible type of distressed property for most buyers. They are sold as-is, though, and often need work.
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Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.