“Cash for Keys”

By Andrew J Thompson, attorney

What does “cash for keys” mean?  In essense, it’s a shorthand reference for a deed in lieu of foreclosure arrangement.   This means the homeowner signs over a deed tot he mortgage holder in order to avoid the process of foreclosure.

This can be a good arrangement for a homeowner, but not always.  Sometimes it backfires.  This happens when a deal if offered to the homeowners by a bank, and the bank gets the home, but the homeowner is not discharged from the debt.  Many homeowners don’t understand or doubt the banks can do this – but they can.  They do it often even when the homeowner may actually have superior rights in the property to the mortgagee.   Nonetheless, the bank may offer an agreement to withhold foreclosure against a homeowner if the homeowner merely agrees to move out of the home.  But the documents used to accomplish this goal, confirm a debt obligation on the part of the homeowner, perhaps unwittingly.

Cash for keys programs, on the other hand, normally take the deed in lieu process and turn it into something more beneficial for the homeowner or occupant.  Instead of leaving the debtor owing money even after moving out of the home, the homeowner is paid to move out of the home and give the bank a deed.  When this happens, the bank normally extinguishes the entire debt and pays consideration to the homeowner to avoid foreclosure.  Why would a bank do this?  One reason is that often the bank do not have a clear claim on the home and there is at least some risk in going through the foreclosure process.  The other reason is simply that foreclosure is expensive and lengthy, and by settling a claim, paying the homeowner and getting the deed to the property, the bank can avoid a long and expensive battle.

If you choose to consider or pursue an arrangement that would enable you to collect a payment in return for the deed to your home, you should take care in how the documents are drafted, and consult knowledgeable counsel to help you with your needs.    If we can serve your needs, please contact the Thompson Law Office today to schedule a free, initial consultation to discuss your rights and the possibilities.

About Drew Thompson
Andrew Thompson is an attorney with 25 years of experience, now with the Thompson Law Office located in Indianapolis, Indiana. Andrew also founded Tinker Street Funding (Equity Crowdfunding platform) in 2015 and FLA-21 (Funding, Legal counsel and Advocacy) in 2016. Mr. Thompson's practice involves helping startups and small businesses establish the business platforms to succeed, and protecting those businesses, homeowners, parents and families in the courtroom.

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