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An eviction team removes furniture during a home foreclosure this year in Longmont, Colo. Real estate agents increasingly try to prevent scenes like this one.
When Mary Poland-Smith went into real estate 14 years ago, she never imagined that part of her job would involve handing out “cash for keys,” to persuade former home owners or renters to vacate their premises.
“It did feel uncomfortable in the beginning,” says Poland-Smith, an agent with Better Homes Realty Inc. in Montclair, Va.
For real estate agents across the country, getting people to move out of their homes without a costly and time-consuming eviction is increasingly part of the job description.
Sales of so-called “distressed” properties, meaning those in or near foreclosure, make up about 30 percent of home resales in today’s extremely depressed housing market.
Foreclosures have slowed this year largely due to legal issues resulting from so-called “robo-signing” but are expected to accelerate again soon as lenders move forward with sales of repossessed homes, according to RealtyTrac, which tracks the foreclosure market. The company projects about 2 million foreclosures this year, 30 percent below last year's levels.
That is a lot of added inventory in a market where less than 5 million units are selling annually.
The rise in sales of distressed properties calls for new skills. The National Association of Realtors reports that 21 percent of its members now hold special certifications to handle distressed property, up from 12 percent last year. Agents pursuing the credentials take courses on how to work with buyers and sellers in various scenarios, and how to work with Fannie Mae and Freddie Mac programs.
Not all agents set out to become distressed property specialists. Poland-Smith, for instance, says banks would call her for “broker price opinions” on various properties, a form of valuation that could be used for multiple purposes—including for a bank to estimate value in an eventual sale. Within a few years, banks began calling her to represent foreclosures.
Poland-Smith says she begins the process of selling a foreclosed home by checking to see whether the property appears occupied: Cars in the driveway, toys in the yard or lights on at night.
She then typically contacts residents three ways: She slips a hand-delivered letter under the door and also sends a letter in both regular mail and certified mail. All the letters state that eviction is avoidable and money to move is available—if the occupants call her within a few weeks. In 90 percent of cases, they do, she said.
She’s typically able to offer them between $500 and $2,500, depending on the lender, if they agree to move out within 30 days, leaving the place “broom-swept” clean.
Foreclosure experts note that “cash for keys” may become more mainstream not just for foreclosures but also for short sales, where an owner is trying to sell their home for less than they owe. In those cases, the lender must agree to accept the sale price.
Earlier this month, Bank of America began piloting a program in Florida that pays short sellers up to $20,000 “cash for keys,” and also forgives their loan shortage (or deficiency). It’s a nice hunk of money for owners otherwise facing eventual foreclosure and a ruined credit profile, although it’s not an option for all sellers.
“The reality is that (cash for keys) saves a lot of money for both the owner and the bank,” says Cliff Roe, a broker and distressed property specialist at Cliff Roe Realty Inc. in Seminole, Fla., who has been briefed on the new program. “Other banks are going to follow suit.”
Lenders lose money on a short sale or on a foreclosure, so their willingness to pay “cash for keys” may depend on how much they stand to lose. According to RealtyTrac CEO James Saccacio, the typical foreclosed, bank-owned home sells for 40 percent below a comparable non-distressed property, while a short sale typically sells for 20 percent less. Capturing a home before it falls into foreclosure might make financial sense to lenders in some cases, he says.
“At some point the equilibrium line gets crossed,” Saccacio says. “Everyone is realizing that the discount on (bank-owned) properties can be mitigated by treating them as short sale properties.”
Not all distressed properties require cash for keys before hitting the market. But increasingly lenders are paying handsomely to preserve rapidly diminishing value in their properties, said Benjamin Barber, a senior sales specialist Green River Capital LC in West Valley, Utah, which manages distressed properties nationwide.
“The more the inventory builds up, the more generous the cash for keys from clients,” Barber says.
Evictions are typically more time-consuming, more expensive, and require more after-care than paying an owner or renter to move and leave the place clean.
Oddly enough, evicting renters can be complicated. Depending on the state, out-of-court evictions cost $400 to $1,100, while a “contested” eviction involving litigation can cost $15,000 or more, Barber says.
PhotoBlog: Eviction scene in Colorado
“Some clients use an algorithm and calculate how much they’d pay in a contested eviction, and then offer half to the tenants,” he says.
For agents, offering bigger checks to residents and in earlier stages of the distressed property spectrum raises mixed feelings.
“But typically these people in the homes are depressed Roe,” the Florida broker. “They don’t know where they’re going or how they’re going to get there. So in the end, it’s the humane thing to do.”
“You get a little numb to it,” Poland-Smith says. “But you have to keep your humanity—and that means you take this work home with you sometimes.”
Click on the video below for a different view:
CNBC's Rick Santelli responds to former Fed VP Alan Blinder's op-ed about a sustainable fix in the troubled housing market.
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After what seemed like a lifetime of thirty-Year adjustable-rate mortgages, with monthly mortgage payments going up all the time, The 123 Refi helped me to lock in a great low fixed rate of 3.16%, helping me to guarantee myself the ability to always make my mortgage payment on time with money to spare.
What would creat the greatest benefit to the American people if we stop paying the mortgage starting in November of this year. If everybody did this, you would force the banks to renegotiate your loan at the existing property value. We would ALL win then. Since property values have fallen 40% your mortgage payment would drop 40% per month. You would still have the same home you have right now.
Then you would have to convince the politicians to lower the values of the properties they have on the books and adjust the property tax decreases. For borrow and spend local politicians that would be like amputating their legs. One thing I can also think of fast is the insurance industry has slowly slipped a cash making machine into your house insurance premium. They make you pay on up to 1/2 the value of the property, house and land, for personal property. I told my agent I don't own anyPicasso's or Rembrandt's and don't have $10,000 pieces of jewelry around. He said that was all the computer would let him do. If you have a fire that destroyed the dwelling they would then ask for pictures ort receipts so would never pay you the full amount for loss of personal property they make you insure.
Sure Fosz - then anybody who has saved money in a retirement plan would see that retirement money be reduced by half or disappear. Free stuff for people wouldn't solve a thing.
Please, no one believes that line.
The Fosz-4254828, Let's say you gave someone a loan for a new car - $50,000.
The minute they sign the paperwork in the dealer, it loses 9% of the value.
50,000 - 9% = 45500. By your logic, they only have to pay you back $45,500 even though they only owned the car for a minute.
Wait, there is more...
After 1 year, the car has depreciated another 10%. 50,000 - 19% = 40,500. That is about a $10k you would will never see again the first year.
After 5 years, the car has lost 60% of the value so that must mean that you would be happy only receiving $20,000 on a $50,000 loan.
If you are taking that big of a loss, then why should the person even bother paying you anything? I mean, it is only your money that is being lost, not someone else's money, right?
The Fosz, if your home jumped up 40% of value (which definitely did happen in recent years), would you agree to INCREASE your mortgage to reflect the current value? Probably not, so why should the banks let you decrease your loan amount just because the value dropped?
Sleazy mortgage brokers and real estate agents never miss an opportunity to make a sale even if it exposes their low standard of decency. They would go on-line and pretend to blog when their true intention is to advertise their business or services. Some brutes even include their business email address and telephone.
This comes on the heel of past TV infocommercials where fast-and-furious real estate promoters field a vast money-hungry audience wanting to learn "buying real estate with nothing down" VHS and CDs for the price of several hundred dollars.
The real estate business is the paradise for people without a conscience.
FatCatGets$700Bil.......
"The real estate businessBeing a "career politician" is the paradise for people without a conscience."Yep, legislation is coming to the Congressional chambers shortly which would give VISAs to individuals/families who purchase a $ 500,000 home in the U.S., or less with some additional requirements.
Now....your corrected statement is more like it.....just ask Reid, Pelosi, Kerry, Dodd and Frank for starters.
On another note: Mr. Obama has labeled Wall Street as "FAT CATS", has signed legislation restricting some of their financial activities, has sided with the "Day of Rage on Wall Street" protesters against Wall Street, but has RECEIVED THE MOST CAMPAIGN CONTRIBUTIONS FROM THESE VERY SAME "FAT CATS".
Time to PROTEST the White House.
Wow, what was I thinking?
I could have bought a beautiful, huge home I could never afford, lived in it for a year or two for free, and then collected $20k in bribe money to move out.
The problem is that I'm old and don't know how to do business in today's world. But I get it now. You spout a lot of PC BS while avoiding any real responsibility and you'll come out smelling like a rose.
Yup! That's how Govt & Wall St rakes in the big bucks. But Human People are always expected to do the ethical thing, which means hand over all your money.
Realtors, inspectors, and appraisers colluded with the banks, by overappraising homes and pushing people into bad mortgage deals. If you know any realtors, then you know the kind of incentives that were passed around--off the top--to steer people to lenders like countrywide and to use specific vendors. Of course, they were just giving you their expertise to guide you through a complicated process. And, yes, these overpriced homes were a godsend to cash-poor municipalities who could immediately re-assess house values and raise property taxes. It was a rip-off from square 1--rigged against the buyer from the start.
But they've made their money by selling your pension companies lousy derivatives that they knew were lousy so they actually bet against them while your 401K put them in your retirement portfolio. And then when all that went south, we bailed them out and also our Federal Reserve rushed out low interest loans to banks and corporations that propped them up and gave them money to charge you 30% to borrow from them with credit cards.
And to thank we the people for saving their butts, they foreclosed and raised all kinds of bank fees.
Now, who's ethical, irresponsible, criminal here? The banks have made out big on their criminality and have the nerve to wag their fingers and remind people to do the ethical, responsible thing.
Give me an effin break.
Why move out? What would creat the greatest benefit to the American people if we stop paying the mortgage starting in November of this year. If everybody did this, you would force the banks to renegotiate your loan at the existing property value. We would ALL win then. Since property values have fallen 40% your mortgage payment would drop 40% per month. You would still have the same home you have right now.
good luck with that plan....
It would work if we all joined in. You can't evict everyone.
Oh yeah...that's great. Let's just all get out of the contracts that WE signed. What an idiotic statement. I guess maybe you should go hang out with the other protestors. You wanted the house you are in. In fact, you convinced the bank that you could afford it...now pay for the dang house and shut up!!!
When you invested in your home, there was no guarantee that the value of your investment would increase. This is true of all investments. You borrowed someone's money and have a legal obligation to pay it back according to the schedule set forth in the agreement that you made with them, regardless of the state of your investment in the home at any time during the payback period. You live there, but you do not own the real property until you have paid for it. You cannot legally force the bank's hand by ceasing payments. This is very dangerous thinking.
To say that they "can't evict everyone" is also a fallacy.. maybe this will end up being the ultimate American job creator?
The Fosz-4254828
this is insanity. the REALITY is that home values will recover and you agreed to pay a certain price for your home when you bought it. there was no stipulation in your contract that the bank had to accept less because your home value dropped. people buy and finance autos all day long already KNOWING that the car they are buying will be worth 25% of what they paid for it when the loan is done. banks lend money knowing that it would be almost impossible to recover their money if your car is repossessed. grow up. you took the loan... pay back the money
What about me? I don't have a mortgage anymore. Do I get a 40% cash payment on the value of my home? Where does this money come from? Dude, YOU signed the contract. YOU are on the hook regardless of the market. Sorry, life can suck. Greed and ignorance is not an excuse to skip out on your obligations. Now they are paying people who have stopped making payments to move out. Is it just me, or are we a nation of fools?
Please, please, please follow thru with you plan not to pay your mortgage. . .then when the banks get rid of you home with a fire sale I will pay for all them in cash.
The fosz: Seriously? So you want everyone to stop paying their mortgages? Do you know what that would do to people's credit? Having late payments on a mortgage drops your credit score tremendously. Insurance companies can then use that lower credit score to raise your rates. Credit card companies would also raise your rates as your score drops. Many employers also look at a person's credit history now, so good luck finding a job or switching jobs if you destroy your credit. And you better hope your car doesn't puke and you need to get another one because you now can't get a loan because you didn't pay your mortgage. Good plan d*psh*t!
since you came up with that brilliant plan let me ask you something. if you buy a house and the value goes UP 40% are you willing to pay 40% MORE since that's going to be the value?
I agree with you on principle however, the reality is that BofA and other major banks were forced to pay an 8.5 billion dollar settlement because of their involvement in causing the housing crash. So yes, when someone purchased a house they agreed to the purchase price and borrowed money regardless of what would happen in the future to the value of the home however, should we still feel obligated to pay back the money when the institutions that loaned it to us were directly and criminally responsible in causing the value of that asset to plummet sometimes in half.
timoreno, the article didn't do a very good job of explaining the real reason the banks pay the money. The cash for keys is also offered to renters who live in the foreclosed homes, who didn't do anything wrong other than not get a lease in writing. Often the renters are not told by the owner that the property is going into foreclosure so they are out a lot of money to begin with. The banks pay it so the property is left in good condition. I work in REO sales and one of the main requirements to get the cash for keys is that you leave the house COMPLETELY intact, clean, yard mowed, and empty of all personal property. You can't take the light fixtures, the appliances, the faucets, the switch/outlet plate covers, etc. Usually the ones that make it to the sheriff lockout are trashed, full of junk, with fixtures etc completely stripped out. So, offering the cash for keys ends up saving the bank money later on in rehab costs. Also, a clean property can be listed for sale much more quickly than one that needs to be repaired, so the holding costs are less as well.
Theft by deception. Why do you think the Attorney Generals are after the banks for their criminal role in this housing mess? If you sign a contract after being deceived about the purchase, will you just throw up your hands and say, "well, you got me." An entire country was obliterated, people lost jobs, income, and the ability to pay their mortgages. Why kneel at the altar of the crook. Of course they want you to believe that it's you, the homeowner, who's the guilty party. Instead, once again, you are the dope for believing that nonsense.
People need to protest this gross criminality to protect their own lives since it's clear that govt is too enmeshed with the banks to do it. OccupyYourHouse. A global movement. People need to get bailed out for the damage done to them by these profiteering bankers.
November 15 is Move Your Money Day. Take your accounts out of Bofa, Chase, Citibank, etc., and move them to credit unions and small local banks that won't nickle and dime you to death.
Pay no attention to the banker/Madoff trolls who come on here and try to tongue lash you into being better people than the bankers ever were. You see where that got u.
IF I go and get foreclosed on because of some economic issue. I guarantee, I am going to live there and file appeals and put away as much cash as possible. The banks created this entitlement mentality with the bailouts and ruined america by doing no diligence on peoples ability to pay. I am going to get mine. 2500 ha ha. That wouldn't pay for a few months of rent. I would tell this lady to go take a hike. I want to live there for 20+ months or more and go to the trough until there is nothing left... Believe me, I woudn't be one of these folks.
It's not the bank's job to determine whether you can repay the money that YOU borrow. Yes, it's generally in their interest to make sure they'll get their money back, but at that end of the day it's not their home on the line. It's YOURS. Therefor, it makes a helluva lot more sense for YOU to make sure you can REPAY the LOAN.
I bought my first house at age 24 and I understood quite well that I was committing to making payments of $xxx.00 per month until I paid the loan off - either by selling the house or making payments until I was 54 years old. This information has been provided to buyers since LONG before all this BS about "predatory lending" came along. If people don't understand how a LOAN works, perhaps they should have enough sense - themselves - not to borrow money.
Hate to tell you this, Miker, but is IS the banks responsibility to make sure any applicant for a loan is able to repay. It's called due dilligence. And the banks are required to protect the value of their depositors assets. When my husband and I applied for a loan in 1993 for a house valued at $69,900, our loan was initially held up over an allegedly unpaid bill for $12.00. It was cleared up and we got our loan, but you can see where I'm going here. At that time, $12 was enough to hold things up. Now the moneylenders will invest "exotic" loans so they can get you under their control.
The banks, Bill Clinton/Freddie/Fannie loaned more than 90% against the collateral/the house, and people took the loans. Although some profited from the boom, that was not everyone. In the long run, these programs and risky loans did damge to the housing industry, and for housing as a primary stabile investment which hurts a majority of people.
Humanikin, the government put a gun to the banks head and told them to give loans regardless of the person's job & credit history.
Do you think the banks woke up one day and said: Hey, let's stop requiring 20% down on all loans. In fact, let's just give money away. I am sure that someone will bail us out later when we are in trouble.
Humanikin
Your story only applies to S&Ls and somewhat to Credit Unions but most banks borrow the money from the Federal Reserve and then lend it out for mortgages. The due dilligence you describe is more to insure profits for the bank and their investors. Here's how it works:
This is problem w/the FED, they essentially can just print up money, lend it to the FED Reserve Banks at the FED funds rate; the chairman of the FED meets with the heads of the Federal Reserve banks and behind closed doors they arbitrarily determine the amount of cash in circulation. The FED Reserve Banks then lend that money to regular banks (at a slightly higher rate) who then lend it to folks buying houses (at a somewhat higher rate). Most of the money used for purchasing real estate is just this fiat currency w/nothing of value behind it but it does create this interest rate differential that allows bankers to generate cash for their banks/investors.
But as you can now see the value of that cash is a very complex calculus based on money supply, interest rates, inflation, demand, and international monetary policies.
If I loan you money and don't bother to find out anything about you, your employment, your credit history, or anything else, that's MY prerogative and none of YOUR business. Unless you own stock in the bank or at least have deposits at the bank, whether they do their "due diligence" is NOT your concern. YOUR concern is REPAYING your loans.
Isn't it criminal to be in a house you dont own or pay rent on? Sounds like a bunch of scumbags to me...gee I wonder who is going to pay for all of this free money...people like me no doubt while millions shirk their responsibility...
No, not criminal until the lender completes the eviction process which is quite time consuming and expensive. As far as your 'free money' drivel goes, it doesn't matter whether the house is occupied or not - if it is sold at a loss, the valuation of other homes in the neighborhood decrease - including yours. In reality, these people are doing you a favor by living in the house preventing the pipes from freezing, weeds from growing, and being ransacked by vandals.
Hey Rick, You must be a republican being told by republicans that its the poor's fault that we are in this sad state of our nation. Obviously, the leaders or decision makers don't need to be held socially accountable for anything they do, they only shold be worried about making tons of money for themselves. Let's identify the real scumbags? the ones's who make the laws on behalf of big business.
Isnt it criminal to give loans to people who had no possibility of not paying and then having the government back them up? Anyone go to jail? Oh thats, right..it only counts for the homeowner! Bankrupcty in business = good - no stigma! Bankruptcy because someone decided to do a pump and dump = terrible.
@jolly joker: No. It's not the bank's responsibility to make sure YOU can repay the money that YOU borrow. That's on YOU. While it may be in the bank's economic interest to ensure they'll get their money back, it's not their home on the line if they don't. It's YOURS.
Miker, you couldn't be more wrong. If banks had no obligation to ensure you are credit worthy then why all the paperwork? While the bank has no obligation to keep checking on whether you can still make the payments in subsequent years. They do have a obligation not to lend out more than they can reasonably expect to get back. The problem is that the banks have no "skin" in the game. They get you the cash from either their deposits (FDIC insured) or from money they borrow (Freddie Mac and Fannie Mae) either way they no longer hold the note but bundle it up and sell it off.
Devil's Son: Sorry, son. YOU could not be more wrong. Unless you own stock in the bank or at least have money on deposit there, it's none of your business what they do - or if they do anything - to make sure you can repay a loan. Your only concern is whether YOU can repay it. As I said, and you apparently agree because you yourself point out that the bank has "no skin in the game," it's YOUR house that gets repossessed if YOU fail to pay. The bank may be out a few bucks - or not - but, everyone who works there will go home and sleep in their own bed the night you get evicted.
If the bank is making government backed loans, it's ultimately up to the underwriting agency of the government to make sure you can repay. In those cases the bank truly doesn't have any skin in the game. You can legitimately argue that the banks should take steps to make sure they aren't being unnecessarily risky with OUR tax dollars - but at the end of the day I stand by my assertion. If you don't want to be put out on the street, it's YOUR responsibility to make sure you can repay your debts. Not the bank's.
Thank you Miker for coming today representing the banking industry. I'm sure your service will be greatly rewarded. Tell your boss I said "Hi!". (Have to love the bank's online PR work. All businesses do it nowadays.) =:D
Dave: I wish! But, they probably couldn't pay me enough to wear a tie to work.
I'm just a "grey collar" working class dog - former enlisted soldier, formerly unemployed, formerly poverty-level, and former full-on blue collar mechanic - who believes in paying my bills and not biting off more (in the way of debt) than I can chew. I was raised to believe that's MY responsibility - not the banks'. Perhaps if more people were raised the same way we wouldn't have this problem.
You're a big Oliver Stone fan, aren't you?
Miker, enjoy your life then. But don't spout 'responsibility' when your status in life can disappear in a blink of an eye. People DO like being responsible. But believe it or not, bad things happen to good people. Perhaps you've remembered your roots, but have forgotten what it was like. Have some compassion. =:D
Maybe you've been able to dodge the bullet for a while, but it happens to us all. Never ever say never.
And I don't like Oliver Stone. Gah! Bad guess! =:D
Dave: I'm certainly sympathetic to people who lose their jobs and can't pay their mortgages. Partly because I have been there and know that it could happen any day to me. You're right.
But, I've got precisely ZERO sympathy for people who took the bait on loans they knew (or should have known) they could not possibly repay simply because they wanted more house than they could afford. Many of those folks were not only foolish and greedy but doubly so because they thought they would be able to essentially "flip" the property and make a bunch of money quickly. With which they probably intended to buy even more house plus a couple of new Escalades or a Mercedes.
My position isn't about people who have played by the rules and fallen on hard times. It's about people trying to say that it was the banks' fault that they took out more loan than they could afford to repay - often because they had no intent to repay it from the get-go. I have a mortgage now. The bank didn't come to me and "sell" it to me. I went to them. But, I went knowing what I bring home every month and with a figure in mind (about 25% of my net income) of what I could comfortably repay over the next 15 years.
Certainly it's possible that I could lose my job over the next 15 years. But, I hedge that bet by also putting away some money when I can in hopes that I'd find another job before my savings ran out. Yes - some people did all that and are still taking it on the chin. If I knew anyone in that position, I would gladly give them the shirt off my back and something to eat - whatever I could do to help. For people who simply "had" to buy a $300,000 McMansion even though they could only afford to do so by taking an ARM - hoping against all reality that they'd hit the lotto or something before the rate reset - I say, "Tough luck. Learn to live within your means."
Everyone is subject at one time or another to being influenced by what they see, hear or read.
It's human nature to want your own place to live in. It's good for the family unit.
Regardless of whether it was the bank, the real estate person or the buyer that fudged on their honesty and presentation to make a house sale, the homeowner should be allowed to stay in the house at a modified negotiated rate.
Life should not be so dog eat dog competitive and cold blooded that it's a all or nothing mentality.
Banks make enough money, people loose jobs, we should strive to keep the USA housing market healthy.
If you have millions of foreclosed on homeowners you have a lot of people out there with negative emotions of frustation, embarassment, and fear.
We don't need that and it should't be happening in the USA.
Injured Vets coming home to no health care, corporate lay offs, unaffordable heath care, the foreclosure issue, immigration issues, college our kids can't afford, lousy politicians serving their own interests.
The USA is in a mess and I don't know about you but I'm worried for our future.
Vets do have health care its called the VA and everyone of us that has done something in the services gets cheap health care, and i know and it is great. I am working in Taiwan right now, the only people who get government assistance is the handicapped and elderly, got a friend that works down at the ADD / Handicapped clinic, talk to him all the time, he is a white guy from Amsterdam..the children get really well taken care of he picks up stray dogs and trains them..the children love the dogs helps them out.
The banks get a lot of heat, but let's not forget that the reason they made a lot of th e loans was the government forced the issue by suing them when they did not abide by the loan targets set by people who just wanted to give the disadvantaged the American dream of a home. Rates were lowered and qualifications reduced to allow people who really could not afford the home. It was a disservice to them and the rest of us who picked up the tab when the banks complied (and went overboard in many cases).
I'd like you to prove that. Show me, or link me to the story that states banks were SUED for not following loan targets? Banks are privately held companies. I seriously doubt the government, or anyone else could sue them for not meeting "targets". Maybe you'd like to believe that so the banks don't look so bad?
In California, U.S.A, both Real Estate Agents and Sheriffs are effectively working for Lenders to evict people from their home: fast and safe.
Sheriffs got good pay per house and it is a long list. Real Estate Agents represents banks to stage and sell the foreclosured houses. Everybody wins, except you.
In reality, there is only few "cash for key". You will get a very bad credits for a very long time. Your dream home has become nightmares and liabilities.
This is a great ideal. The banks get what they want and the people who are in trouble are not thrown out in the streets by the cops in an embarrassing way and they get some money.
"Earlier this month, Bank of America began piloting a program in Florida that pays short sellers up to $20,000 'cash for keys',”.. So why don't they work with the home owners to restructure their mortgages? Because they make more money by wiping the loan off the books! It's kinda like selling toxic bundles to others (after standard and poors rated them a++) or selling them to the US as collateral..
quite the opposite. they get to retain the homes on their books at the full value and they own the home which they actually purchased at a discount from themselves. the banks show up at the foreclosure auctions and purchase the home. once the home is sold in a "market sale" (assuming it's at a discount) the bank then "discharges" the difference between what they sold it for and what was owed. they still have the right to pursue the former homeowner for the difference. if they can't collect they will issue a 1099c to the former homeowner as misc. income
SO how are the showing the $20,000 as income as well. In most states they wil not pursue the difference, depending on the amount.....And if it is lower than the required for capital gains taxes you may not have to claim anyway.....
Yeah, the banks have a huge stockpile of foreclosed homes. Who will buy a foreclosed house from a bank? If you plan on purchasing a foreclosed house, you had better perform your due diligence and make absolutely certain that the selling bank had proper title before they foreclosed or you had better get some rock-solid title insurance from the selling bank.
Once the banks have enough foreclosed homes and the government wipes them off the books, they will figure out a way to make money getting rid of them through insiders and scr wing the homowner and taxpayers more. Don't worry. They have a plan. You just haven't seen it yet. Its coming.
I had a realtor approach me with a cash for keys deal back in 2003. At the time, it was win-win for me. I was frustrated, embarrassed, and fearful as a single woman. In the end I was still not happy, but it beats having your belongings set out on the street!
Lenders lose money on a short sale or on a foreclosure, so their willingness to pay "cash for keys" may depend on how much they stand to lose.
The writer might want to look at all the videos showing the banks make money on foreclosures with the governments programs. Why else would they do it as fast as they can? If it wasn't profitable they would work more with the homeowner. At the very least make sure they actually qualify to make the payments.
yeah the whole mortgage thing is gettign way out of hand...I have to be behind by two months in order to set up a SHORT SALE, but BOA won't renegotiate or modify my mortgage to anything close to the actual value of my house. I owe 150k but only worth 70k. But now you are offering upto 20K for me to move oout where do i sign...
It si easier for me to walk away and allow my spouse to buy a new house at the lower price in her name. I would have her buy my house in her name but the neighborhood has gone to crap...only a few houses actually try to keep the yard and surroundings nice mine included.....
Were you aware of the risk of dropping home prices when you purchased?
The market value has nothing to do with making your payment.
Imagine you have a nice classic car for sale. There are only 10 remaining in the world. It is valued at $120,000. You put it up for sale and right away your friend decides to buy it outright with cash. Over the next few weeks we all become aware that, of the 10 remaining, one is stolen and wrecked and a second is destroyed in a house fire. The value of the remaining 8 classic cars shots up from 120k to 150k.
Do you then ask your friend to give you an extra 30k or at least a portion of his gain from buying your car at 120 and now having a car worth 150k?
Because asking bank to reduce your loan simply because your "investment" lost you money is the same thing
All in all, in open but bias opinion, don't take the deal.
(do your self a favor and stop telling lenders/collections any more information then they already have)
Do Not Sell your SHORT sale with Recourse. You will likely be on the hook for 7 years vs. 2 years for a foreclosure! Yes your taxes will have to realize the gain but for many of us insolvent, we will avoid the taxes. As for this article, there's likely another reason for this "cash for keys" option. Again yes you will pay income taxes on monies received but now for many, may be solvent enough to pay the gains. -im thinking circle je..- another thought if lenders get bailouts then those of us who paid gains, on the short, should get a tax rebate.... geesh it can go on and on.
If you have the cash and want to play the game too, pit the first against the second enticing the second to take a cash out deal. The second needs to see your intending to default the first, likely from a soft credit check. (timing of this is dangerous often with only days or even hours left not for the faint, weak minded or gullible)
Also, some lenders, after foreclosure, will allow you to rent or lease the property.
Do not be passive, lenders do have long fingers hence the word mortgage, meaning DeathGrip.
What's killing us, me & my husband, is the 10 months we've been working with the bank, and then all of the sudden, one of the paper pushers got ugly, we paid for & brought in "advocates", more money, he's been living at the UNC Cancer hospital, while I work everyday, as he has always done, pushing the papers to expidite what should have been a simple modification, our loan while still sending everything everyone asked for, ours was upside down, and the calls each day from the bank told us repeatedly we would be notified of the new payment amount, long story short, we didn't want anyone to bail up out, we just wanted a person to deal with, get the mod done, move forward while juggling work, illness, etc., and now, the lawyers on behalf of the bank are ready to foreclose, all o fthis while still working toward a modification in our loan...so complicated, and all we needed 10 months ago was one person to talk with, expidite, move on - it's such a mess, unless you've been right there each step of the way, please realize not everyone in this mess is trying to get something for nothing, we want to pay for our home, we want to live there and hold our heads up knowing we've done the right thing the right way - but there is no one that will even listen. There won't be a person show up to offer us money for our key either...it's so frightening to be here and have no way to turn except bankruptcy. Ain't life grand.
that was all they had to do was reduce mine by 20-30K and everything would of been fine but no Citi and Fannie mae didnt want to help anyone even after throwing away 14k for the last yr I paid them as they said they were working on a plan to help underwater home owners. screw them they can have the property back but they cant have my home as I moved it to my new property since they had nothing in the contract saying the home was part of the property, no affidavitt of affixture or anything like it or nothing in the loan documents.
Were you unable to keep up your payments or did you just not want to?
Hey BigKev,
I bet you still have a job to pay your mortgage payments, isn't it great to slam others who are jobless and can't pay for their homes, some of us have paid the mortgage for 20 years and now we loose it, you are a real true blue American.... if you know what I really mean. Thank you God for good old AMerican boys like BigKev... how did we manage to get along without those like him.
We have been trying to get our home modified for 2 years! Income was reduced to half of what we were making when we bought the house, value has dropped by 30-40%. We have a mortgage through one of the banks taken over by the GOVERNMENT -so I know the current mortgage holder only paid about $100K for the home. SO the bank makes out either way - big business wins - hard working stiffs - lose, again. Big Surprise here.
Liars. They don't lose a thing. They get a hefty tax write-off AND they get to sell it all over again to lock somebody else into a monthly payment. Then wash, rinse, repeat. Then they can also come after the previous owner for whatever difference between the firesale price and the loan amount. There's a sucker born every minute.
Sure, it's the American dream to own a house and is good for the family unit. I feel sorry for those who are losing their homes because of some catastrophe. However, there are a lot of people out there who bought more house than they ever should have and/or borrowed more than the house was worth. My husband and I could have gotten a loan for a much larger, nicer house than we have. We could have also borrowed up to 120% of the value of our house. Our house has been appraised at $145,000 in the last month. We just refinanced to lower our rate to 3.25%, borrowing $90,000. Wanna know the kicker? My husband has been unemployed for a year and a half. We have always made sure that we can live off one of our incomes if we need to. Even with both of us working, our annual income was less than six figures. People just need to BE RESPONSIBLE with their finances!
Peggy I am glad to see that there is someday who really gets it. If all Americans were this frugal things would be better for everyone.
I was one of those but the bank didn't care if we had paid for twenty years, I was the bread winner and my wife had a big job taking care of the home and the kids. There are alot more of us here in the USA then you would think.
A good payment history counted for one thing with our Richy Rich Bankers and that was thanks for that money for 20 years but you can't give us anymore so get out.
The bank is living its Amercian Dream....................
Bank of America is one of the biggest scam artists around. Any reason they can find to begin foreclosure and then unwilling to work with anyone. They foreclose, collect the PMI insurance money and resell the house. NEVER USE BANK OF AMERICA!!!!They lie at all costs and care nothing about people. BANK OF AMERICA---YOU SHOULD BE ASHAMED OF YOURSELF BUT ANY BUSINESS THAT TAKES FREE MONEY FROM THE US GOVT WITHOUT PAYBACK HAS NO SHAME!!!!!
If the Goverment is helping the Banks by bailing them out on the foreclosed property. Then the homeowner homes should be paid off. The banks get there money back, and the goverment owns the homes, and work out affordable payment with the homeowner to paid back the goverment. With a lower interest. Or you can buy back your home through the Goverment. Make sense to me. Otherwise the Banks get the bailout and still want the homeowner to paid back the banks, who already received money from the Goverment for those bad loans, once the Banks took that bailout, they shouldn't have nothing else to do with home mortages at all. Finish.
This "cash for keys" is a great deal for those who end up with the homes, for they have billions to work with, and when the market finally comes back, they will make a killing on these homes. If you understand corporate accounting all bad debts can be written off at the mortgage level which is high, then sold at a later date at a lessor value and the difference is good profit. 1. Mortgage value 100,000 to Bad Debt 2. Resell at 60,000 3. 100,000 on books bad debt less 60,000 sale = 40,000 plus 100,000 at tax rate of 17% is 57,000 tax free income, plus the new interest of the new mortgage. Not a bad deal for the banks. If the books are cooked right they will also receive mortgage insurance from a company like AIG. Just ask Arthur Anderson how its done.
I work at a Real Estate office in California that receives these "Cash for Keys" checks daily from the big banks, BofA, Wells, Chase and Citi, The Agents and Banks are the crooks here when the "Cash For Keys" come into play. The checks are at a minimum of $5000 all the way up to $15,000 for some houses. Here is what the kicker is and sad at that; the departing homeowner only is offerred a fraction of these monies, typically 20%-40% of the actual check sent to the agent's office by the foreclosing bank. The remaining funds go into the agents' broker pocket and the bank looks the other way while the agents end up with the listing and makes an additional comission for which is then legal. The check that is sent to these Real Estate offices are for those homeowners in full not a bargaining tool as used by most of the agents. The homeowners are at the lowest point of their live(s) losing their homes and many of these agents and banks have no compassion for that take away from what was intended for them to get some kind concession to leave without incident and relocate their family to another "home". Very disapointing and truly sad. Many of those Real Estate offices that participate in this type of conspiracy are making money hand over fist on good families and people misfortune.
USNA, that's odd. The real estate company I work for, the broker fronts the money himself for most of the cash for keys. He then has to submit paperwork and copies of checks etc for reimbursement from the seller (mostly Fannie Mae), which can take up to 6 months. The reimbursement checks that come back are for exactly the amount he paid off. I've never even heard of what you're talking about, and I've been at the real estate game over 10 years.
Restructuring doesn't make sense if the borrower can't or won't pay more than the bank can make reselling the property. If you owe $300,000 on a house that's worth $150,000, and can afford to pay the rates on $200,000, that's a candidate for restructuring. If you owe $300,000 on a house worth $200,000, and can afford $150,000, you're pretty much hosed, and the sooner you admit it and GTFO, the better off you'll be in the long run. You bought tulips in 1637. Pay your stupidity tax and start over.
Real Estate agents like these are the equivalent of "AMBULANCE CHASERS"!