Evicting Tenants: How effective are Cash For Keys offers?

If the PTFA law makes landlords honor existing leases, or at least provide 90 day notice to move: 1) How effective are cash for keys offers to expedite eviction? Do tenants typically feel uncomfortable enough or motivated to move out (with or without a cash for keys offer) or do they usually exercise their rights to stay 90 days or the remainder of their lease? 2) What is a typical effective Cash for Keys offer? Is it 2K, 5K 10K and for typically for 15 or 30 days? 3) should investors avoid bidding on a property without knowing if there is a tenant, the lease status and the intention of the lessee? 4) What is the most efficient way to determine if a property has a tenant?? Is just checking to see that the owner has a different mailing address on ForeclosureRadar, enough?

Posted by Bob
from CA




36 Answers

-1
1. Very effective if you have good people skills and the folks aren't completely whacked. 2. Expect to pay 1-2 months rent. Most folks need 1st and deposit to move. Start at half that. 3. Some investors do avoid them. That may mean you can get a better deal, so its a tradeoff. The key is to know. 4. While a different address is a good clue, it isn't enough. Lots of "investors" bought as owner-occupants to get better rates, and as such used the property address as their personal address. Only sure way I know is to ask. Either the occupant, or sometimes a neighbor. Tools like Accurint or Merlin Data can also help if you want to spend the time and money really digging into who might live there.

Answered by Sean


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Great, thanks, good information! If I can coax you to be a tad more specific to #1, would you guess cash for keys offers are effective 95% of the time (only get stuck 5%)? I know there are tenant rights websites detailing and encouraging tenants to fight for their rights. How many times have you tried this, just to get a good understanding of your "sampling."

Answered by Bob


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Also, if you offer 1 or 2 months, is it to move in 15 days, 30 days?

Answered by Bob


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I've purchased more than 150 foreclosures, and I'm sure at least 100 had an occupant. No idea how many were renters vs. owners, but plenty of each. The web has certainly made everyone an "expert" - but cash for keys isn't about tricking people out of their rights, so I don't know that it matters much. I won't give you a % because as I indicated above it really depends on the negotiation skills of the person handling it. I've had folks working for me with a zero success rate, and others 100% successful. Impossible to say how you will do.

Answered by Sean


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No hard and fast rules. You need to assess the reality. If the folks have two pieces of furniture and look like they could really use some cash, you might want to start with offering $500 if they are out tomorrow. If you have a family that's been in the house for 10 years, with every nook and cranny full to the brim, your going to need to expect it to take longer. I think the most important thing to understand about the foreclosure business is that there is no formula. Nothing always works. Common sense and flexibility are the key.

Answered by Sean


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Another successful strategy that I have seen used frequently is to offer a certain sum, say for example $2,000, if the house is vacated in one month. Then further agree to pay an additional $500 for every week the house is vacated sooner than that. The occupant then has incentive to move out sooner. Also, you may want to have the occupant sign a written "Relocation Assistance Agreement" (a.k.a. cash for keys agreement) which includes a provision that the house will be turned over in good condition, broom swept clean and with all appliances and fixtures in place. While actual enforcement of the written agreement may become a procedural challenge, it will make expectations and obligations clear .

Answered by Mark


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1) So of your 100 or so purchases with occupants, did you offer Cash for Keys, and in your own personal experience, (I'm assuming you have good people skills) were you successful say 95% of the time? 2) Owner occupants have three days to quit, right (at least here in California)? So I assume cash4keys is not as important, as you have legal leverage to force a quick exit, though I'm sure some occupants want to continue living rent free. So are Cash for Keys offers necessary or helpful when dealing with the prior owner/occupant?

Answered by Bob


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1) Can't recall. I personally wasn't great, primarily used others who were better than I at it. 2) 3 days to quit, only means 3 days before you can file the unlawful detainer. Entire process is 45-90 days. cash-4-keys is almost always the right way to go.

Answered by Sean


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-1
We have purchased 9 homes at the auction in the past 13 months. 3 had tenants. It is my opinion, that the tenants are real victims in the foreclosure mess. They have been lied to by their deadbeat landlords who all continued to collect rent and not pay the mortgage, taxes or HOA fees. But we need them to leave and the sooner the better. I am not there to be their legal counsel. But we do treat them with respect and fairly. In the real world, the tenants know they have to leave and the offer of cash for keys has worked to their advantage everytime (for us). As Sean says, it is a negotiation. They don't need the law if they get what they need. As Mic said, "you can't always get what you want, but if try, sometimes, you get what you need". Be fair and respectful to these poor soles who are the victims. They will be grateful and happy.

Answered by Richard


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Awesome advice Richard, thanks for contributing.

Answered by Sean


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Sean -- You suggest using services like Accurint or Merlin Data to find out more on who is occupying a property. Do you mind being more specific on the exact Accurint and Merlin Data products you suggest for doing this (Both services offer a slew of products). It'd be nice to have an extra option as talking to neighbors and getting info from occupants isn't always fruitful. BTW I find your online service suggestions helpful. In the past, you suggested I look into TitlePoint Express which is an amazing service.

Answered by Andrew


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Andrew - its been a couple of years since I've subscribed to either. I do remember that getting started with them is somewhat daunting. I'd suggest getting on the phone with each company, tell them what you are trying to do and have them make a recommendation and walk you through registration.

Answered by Sean


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I guess it was inevitable, but we have purchased an auction house with a difficult possession issue. It is difficult because the occupants have lied about just about everything. At first, they told us they rented the house and they and several other people were living there. So, we opened negotiations for cash for keys. They said they thought they could stay longer than we were offering. We told them that this was correct, but if they did not leave early they would not get any cash from us and would have to pay us rent. We gave them several days to think about and made a couple of more visits worth no results. It was obvious the woman was anxious and was stalling. The story and number of people living seemed to change with every conversation. Finally, we found out that the owners also lived there and that the rest of the people were relatives. The family is Mexican and they are sticking together. We found the owners at their place of business and met with them a couple of more times. The meetings were contentious at 1st, but we eventually sat down to try to understand what they needed and tell them what we wanted and see if there was middle ground. They claimed they were working on a loan mod and did not believe the foreclosure really happened. We showed them the Trustee’s Deed and they seemed to understand it. A couple of days later we met again, this time they told us they did not want our money, just more time to stay. Based on the series of lies and outright rejection of the cash for keys offers, we decided it was time to get the attorney working on a formal eviction. Although the owners lived there and we could have tried a 3 day eviction, he advised against it because of the fluid nature of the other occupants. It is clear that most of the people living there are relatives. When we asked for a rental agreement, they reported there was none. So, we are proceeding with a 90 day eviction. So here is an example of abuse of the tenant eviction regs. Unfortunately for the owners, we will get a judgment and it will get recorded. They have a small business and I am sure they need their credit. As I understand it, the judgment will be on their record for 10 years. So, yes, CFK is best for everyone. A basic requirement for a successful negotiation is enough honesty and willingness to allow the parties to understand the needs of the parties. Once it was clear they were not willing to negotiate in good faith, we really had no choice but to enforce our rights. As you can see, once these so called tenants exercise their assumed right to stay, we will exercise our right to have the Sherriff hall them out and add another mark to their credit.

Answered by Richard


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Would you let the original owners of the foreclosed property, become renters of the house if they expressed a strong interest not to move and were willing to sign a lease with deposit etc? Or would you just kick them out to avoid problems in the long run?

Answered by chris brown


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If you are planning to rent it anyway, I don't see any real downside. I'd probably only do it if they were taking care of the place, had stable income, and were reasonable to deal with, in addition to the lease and deposit you mentioned. If you plan to flip, better just to get it over with now.

Answered by Sean


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yes...but $500 & a day to move for people who have little funiture...aka...dirt poor...does not sound fair. If it was me, I'd say heck no, stay w/ help from any free (since I'm dirt poor right) legal advice, pursue my right to deposit, sublet, possibly see what structures were for sale in the house (washer & dryer, staurcase, etc...get the picture) unless he wants to began at 2,000 & at least 30 days notice. Have a nice day...

Answered by Lynne


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As a renter, selling fixtures would be illegal... theft or at least "conversion". We've actually called the police in one of these cases and had the folks arrested. You get what you pay for with "free legal advice". Threats to commit illegal acts or abuse our court system are not the best bet for renters in this position. That said, they should know their rights (ability to stay till end of lease, etc.), and they should certainly negotiate the best cash for keys deals they can.

Answered by Sean


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I'm not advising anyone to steal...but once the home is forclosed I think some things are up for grabs. If you had someone arrested...i doubt if it stuck ( unless it were clearly & painfully obvious...everyone knows most banks initiated cash for keys to prevent property damage from a disgruntled person) & it was probally less painful than 500 bucks (a room for rent or cot in CA) & move in a few days. I just saw a property for rent that was a beautiful house & apparently someone came back (best guess former occupant/owner) & tore out piping, damage refinished basement, I was just about to submit to live there & the poor Agent was in shock. They even did the nasty in toilets. No arrest yet only suspicion. Sounds like to me you just never encountered the 'right' sort of canidates yet...or you're not mentioning it. I say treat people reasonably fair...(common sense) & less bite later.

Answered by Lynne


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p.s. Only an extremely 'unwise' person would not listen to free or reduced legal advice & instead take the word of someone who's best interest is for them not to. lol...Legal Aide is non-profit & some of the best bona fide attorneys who are usually idealistic & this stuff (going after wealthy s special interest) is sort of the dream job for some...not to mention all the Pro-Bono attorneys they refer poor or working class tenants to.

Answered by Lynne


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In negotiations with a bank for a foreclosed single family home in Los Angeles that has a tenant. Tenant has supplied us with a "lease" signed with previous owner 2 months before home went back to bank. Lease is 3 years in length and for substantially below market value ($800 per month in neighborhood where rents are minimum $2,500+ per month) for home type and area. Everyone including broker who has listing for bank thinks the lease is forged. Is the "lease" valid or can they be evicted upon close of escrow. We will be owner/occupier. Cash for keys a good option? What are potential hazards? Also issue of now missing security deposit tenant paid at start of lease... Any light that you can shed would be greatly appreciated. Waiting in Hollywood...

Answered by Alex


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HI Alex, Sean wrote a great blog post about this a couple of years ago http://www.foreclosuretruth.com/blog/sean/auction-investors-reo-brokers-and-renters-take-note-significant-change-eviction-notice-req/ It is my understanding that the lease would have to be signed prior to the Notice of Default and in order to be a bona fide lease agreement it would have to be an arms length transaction (no relationship between the tenant and the mortgagor) or not substantially less than fair market rent for the property. Once you arm yourself with the information found on the blog post listed above your best bet may be to negotiate a cash for keys deal. If you can resolve this through negotiation that is always the best option.

Answered by Michelle


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If I were making a decision whether to agree to a cash for keys offer, I have consider the following: 1. The security afforded by state and local laws. If those don't allow expulsion after foreclosure or provide a longer notice period, you should be offered more money, as you have a greater awareness in staying in your home. It may be more suitable to move at the end of the school year, for instance, and if your 90 days would get you to July, you might rather not move at the end of April. Yes, it is all right to say that moving at the convenience of the proprietor is not convenient for you. 2. The amount of your deposit. If the cash for keys offer is less than your deposit, it means you are giving up the variation. Do you want to do that? If the lender organizes the cash for keys agreement, it will most likely state that the agreement settles all declares you have on the lender, which means that you give up your right to sue the lender for return of your security deposit. 3. The price of moving. Include in this protection/pet/other deposits, the cost of movers, or the truck and pizza for your friends, utility deposits, shifting your address everywhere, the time you have to impression work to deal with finding a new home etc. Regards, Clawfoot Tub

Answered by racks jackson


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Racks - On 2, note that you are not giving up your right to sue the former owner for your deposit if you accept cash-4-keys. Its easy to file an action in small claims court, and judges rarely take kindliy to landlords who fail to return a deposit. In some states, like CA, the tenant is also entitled to a pretty significant penalty. 1 and 3 are definitely good negotiation points, but know that there is no law that requires the landlord to pay moving costs utility deposits or any of those other items you mention in 3 if your lease and notice periods are over, so there is a limit to how much that argument will buy you.

Answered by Sean


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How about a tenant with an unauthorized dog (pit bull) that is both a liability and damaging the premises? The tenant was already told to get rid of it and hasn't. what is better, cash for keys or eviction?

Answered by cm


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Sounds like you may have grounds for eviction. I'd serve them a notice to remove the dog or quit - a variation of the pay or quit notice that typically starts the eviction process. You'll need to do it anyway in order to evict and it may help start a conversation leading either to them simply moving out, removing the dog, or negotiating some sort of agreement (cash-4-keys). If they don't then you can go ahead with the eviction. Personally I always do cash-4-keys and eviction concurrently. It is easy to cancel the eviction if they move per the cash-4-keys agreement, so there is no reason to delay doing it in parallel.

Answered by Sean


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Thank you for your time. I am paid up on my rent. I have no intention on not paying or staying here for long. I just want to know what my legal rights are. I am recieving section 8 that helps with my rent. I thought new owners have to give 90 days when its going through escrow? And I have only been served a thirty day notice. on the notice it says housing tenants get 90 days. They ignored that and checked off 30 day notice. If I am allowed 90 days then 1,500. is not enough. I will need to get a motel for us and storage until I find proper housing to pass section 8 inspection. Its been 10 days from notice. They can not evict me until my 90 days are up, right? And I still feel like I have not properly been served? I have no problem giving cash for keys but, I need more cash to move out in 10 days. I need help from moving co. I cant do it alone.. Thanks again. So my big question is. where do I stand legally? I have great rental reports and plan on keeping it!

Answered by chris


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HI Chirs, The Protecting Tenants in Foreclosure Act which provides for the 90 day notice when a tenant is living in a property that has been foreclosed. In your case this is not a foreclosure and the landlord is not obligated to give you a 90 day notice. They are only required to give you the appropriate notice as outlined in your lease agreement. This is typically only 30 or 60 days. They just have to give you written notice and they do not need to physically serve you. Sending it in the mail would be sufficient. It sounds like they have given you the 30 days notice and because they really want the house quickly they are trying to incentive you with cash in exchange for you moving early. If 10 days if not reasonable you could certainly negotiate with them.

Answered by Michelle


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I am buying a foreclosed home from a bank through auction.com auction. At the close of escrow - next week - I will get a quit claim deed from the bank/seller. The property is still occupied by "someone" (presumably previous owner or a relative). What is the best action plan for me? Should I try to arrange C4K myself? Or post 3 day notice first? Or hire an attorney to handle the eviction? I have bought several REO properties before but this is the first time which will involve eviction and I am nervous (to say the least)!

Answered by Sandy


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You should try to negotiate cash for keys (C4K) AND post the appropriate notice (if they're a renter a 3 day won't work - try to find out when you go to negotiate C4K). As for whether to do itself or use a professional, I'd recommend using a professional if this is your first time. You can usually find an eviction service that works with an attorney (cheaper than using attorney for everything).

Answered by Sean


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Thanks Sean. If nobody opens the door when I go there - what are my choices? I will of course put the notice but in whose name? And for filing UD - how do I know how many adults live there? And their names? I can probably find out the previous owner's name - should I just assume that is the one who is living there?

Answered by Sandy


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Eviction service can walk you though it. If they can't find the folks, they will get an order to post from the court. More info on the unlawful detainer process here: http://www.scscourt.org/self_help/civil/ud/ud_file_and_serve.shtml#others, though note it appears to be out of date as the Protecting Tenants at Foreclosure Act requires tenants get a 90 day notice.

Answered by Sean


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Do you have to give your ss# and sign a W-9 if you accept Cash for Keys? Not sure if you've answered this question.

Answered by cindy


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Thank you for your time. What are the magic words to say to the realtor to get the bank to offer cash for keys? Please your help is invaluable at this point.

Answered by maryl


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Maryl - Very rare that occupants are not offered cash for keys. One exception might be in states where the eviction process is very easy, thus not giving the bank any incentive to do it. Research the eviction process in your state, and then nicely let the agent know that you are aware of your rights, and how long you have to stay, and that if they want you out earlier you are willing to consider an offer. Also, if you are a renter (not the owner), know that you'll have additional rights under the Protecting Tenants at Foreclosure Act.

Answered by SeanO


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The only problem with that is that the tenant can get rid of the dog temporarily, and claim that he has gotten rid of it for good. I already told him at the lease renewal three months ago that if he kept the pit bull, I would end the lease. I think its better to make the eviction based upon the tenant creating "waste." (as you know property damage), which I have already documented by taking pictures. That way he can't use the issue of supposedly getting rid of the dog as an excuse to not get evicted. In my experience, tenants who say they have pets will almost always try to sneak them back in later in the lease. Wed Aug 8th 2012 at 12:19pm

Answered by CM


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Chris - you should consider contacting a Legal Aid society in your jurisdiction or you can call your local bar association and ask for a Lawyer Referral Service to meet with UD lawyer to advise you. Those attorneys donate their time, usually a half hour. The fee you pay is usually a small administrative fee to the bar association for administering the referral. Lastly, the court's website should have explanations for you about understanding the process of eviction. They will not tell you what you want to hear, but they should be able to understand what basis the Notice is claiming and whether is adequate. Arm yourself with knowledge, but make a plan because you have your children to think of if you need to relocate quickly. Mon Sep 24th 2012 at 8:45pm

Answered by Julia M. Wei, Esq.


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