Cash For Keys: A Foreclosure Cleanup Service

Dec. 31, 2010 - PRLog -- The following is an excerpt from the article entitled above.

What Is It?

Cash for Keys (CFKs) is discretionary money that banks offer to people who defaulted on their mortgages. The person who signed papers for the loan is called the mortgagor. Banks try to offer settlement to help them vacate. In some cases the mortgagor(s), no longer lives in the home. This is true if the property was a rental property, or the mortgagor is deceased. It can even be the case if the mortgagor has divorced and the divorcee lives in the property. There are many different scenarios. Either way, the bank offers these funds to whoever currently resides in the property.

For simplicity, I will say occupant many times in this article and I will be referring to the mortgagor or any other occupant of the property.

I have worked on several CFKs work orders. One property involved and occupant who was a divorcee and had no idea that during the divorce proceedings that the house was in default, as I was told.  Over the course of the year after the divorce, the occupant tried to save the home only to end up facing eviction by the banks.

This is there my property preservation company got involved. A larger Property Preservation Companies was hired by the bank to complete the CFKs. This property preservation company then contacted my foreclosure cleanup businesses. Since I offered these services, I was able to help assist in getting the property vacated, cleaned up and ready for the market.

In most cases there is additional work that can be completed on any vacant property: cleaning carpets, painting walls, etc. so there is potential to profit before the competition bids on the work if you offer CFKs.

The banks give first preference of potential work to the companies that complete the CFKs. But any preservation work that needs to be completed is suspended until the occupants have vacated the property.

What CFK is Not

In the case of the individual described above, it took the bank almost a year to offer Cash for Keys settlement, before I was contacted.  Of course, the occupants had no idea that CFKs was even an option. After trying to get caught up on the mortgage, the bank finally decided that they were ready to offer the CFKs program to the mortgagor/ occupants.  

In my experience of negotiating CFKs settlements for occupants, one thing that I have come to realize is that CFKs is not a reimbursement system for all the money that was lost during the foreclosure process. CFKs are considered to be a ‘relocation assistance’ program offered to occupants by the banks.

What this means is that it will provide the occupants with funds to get moved out of the property. These funds can be used toward the down payment for new housing.

When Does the CFKs Process Start?

Exactly when banks offer CFKs is still an unknown to me. What I have noticed is if the property is at least 6 months behind, then banks will start negotiation proceedings.

Another thing that I noticed is if the mortgagor asks the banks for the Cash For Keys Program, most are denied. If they are approved, then they are given what the banks want settle for.

The CFKs process is contingent on a timeline. Banks use the CFKs as a last minute negotiation when the mortgagor is unable to get the property mortgage payments back to current condition.

Why Is Cash for Keys Offered?
   
The CFKs program is a way that banks protect properties from receiving damage or additional damage due to neglect.

There are many mortgagors in default that remove appliances, customized fixtures, or even damage the physical condition of the property. The banks offer the CFKs program to ensure that their asset is protected. I know. I have seen what people do to properties out of anger.

Offering cash to occupants, ultimately saves the banks from additional costs that are involved in rehabbing properties that otherwise were in good condition or costs involved in attorney fees.

If a mortgagor defaults on a loan, more than likely they are having financial struggles and the money that is offered to them through the CFKs process is incentive to restart and at least have some money to find somewhere else to stay.

In order to receive the CFKs check the occupant must remove all personal belongings and leave the property in what is called broom swept condition.

Property Preservation Vendors Role in CFKs

The foreclosure cleanup company that offers CFKs as a service is the eyes and ears for the bank. The vendor visits the property and explains that they were sent to offer the occupants cash in exchange for the keys to the property.

The vendor explains that the property must be completely emptied and cleaned. If the occupant agrees then the negotiation process begins.

If the occupants disagree then the vendor politely informs the mortgagor/occupant that they will let the bank know and the bank will be in contact to complete the negotiation proceedings.

Let me give you an example of how this works.

Negotiation 1: Initial visit
   Offers the occupants $500 and 30 days to vacate.
   Occupant declines and asks for $2500 and 45 days to vacate.

Negotiation 2: 2nd visit
   Bank declines $2500 and 30 days to vacate
   Bank renegotiates $1000 and 15 days to vacate
   Occupant gets nervous, but still declines the offer.
   Occupant renegotiates $1500 and 15 days to vacate.

Negotiation 3: 3rd visit
   Bank agrees to pay $1500 and 15 days to vacate.

How to Negotiate CFKs

The CFKs process is basically based on two things: Time and Money.

Banks want the occupants out of the property as soon as possible and they want to save as much money as possible.

The check amount that banks approve, depend on several things, including the location of the property. Is the property located in a prominent area? The amount most banks try to offer occupants in this program is usually equivalent to at least 1 month mortgage payment.

There have been times that banks deviate from this rule of thumb. Particularly because the occupant settles early in the process or the occupant holds out long enough that the bank became willing to offer more money in the process.

In my foreclosure cleanup business, I offer CFKs to several of my clients. Almost all of the occupants that I have worked with, I still have relationships with them because I realize that am also offering them a service. It is my duty to treat them with quality service.
As you can see there is money that can be made if you know what companies to work with and how to get started.

If you know those two things then you may be on your way to building a strong business.

To learn more about the CFKs process watch the KPBS CFKs Video below:

http://www.kpbs.org/news/2009/nov/03/cash-keys/

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Carolette Wright is the owner of MaHaCa Proeprty Preservation Services. Established in 2009, MaHaCa Property Preservation Services has completed over 800 foreclosure cleanup jobs to date.

Carolette Wright specializes in being the leading Authority in Property Preservation Industy Contacts. She helps new and struggle Foreclosure Cleanup Businesses get more Jobs to their business.

Mrs. Wright is the author of Property Preservation Companies: Contact Lists, Jobs & Services.

If you are looking to build your property preservation business and need more contacts then http://propertypreservations.net may have exactly what you need to grow your business. Visit the site today!