Cash for keys for tenants

[Sweetpea3829]

Hi everyone...so for those of you that have been following our situation....quick update...the lender of our IIB BK7 2007 mortgage is willing to consider a DIL now, instead of requiring us to go the 120 on the market and THEN attempt DIL route.

This is great...it means we can get both mine and my husband's names off the title quickly and clear us for approval and closing on a USDA Direct loan to buy a single family home.

While we wait for the DIL to play itself out, we are quitclaiming my husband's name off the title so that he can go ahead and apply for the USDA loan.

In the meantime...we still have two good paying tenants at this rental property that we are giving up. They are good guys...we are not interested in screwing them of anything and in fact, would like to give them an opportunity to be here rent-free if possible.

I have heard of cash for keys...does this apply for tenants? Does it apply to tenants who's property has had a DIL or a short sale completed for? What rights do these guys have?

What kind of cash amount are they looking at if they qualify for cash for keys?

[Sweetpea3829]

Addendum: Do we have to pay the tenants their security deposit back, or does the bank pay it back to them when they take over the deed? We don't mind giving them their deposits...but if we don't have to, that would be nice.

[tyson24]

The amount of cash for keys can vary. I have heard anywhere from $3000-$5000, but I am sure it depends on your metro area and lender. I have a friend who does REO, and he said Chase has been pretty good about cash for keys. I am hoping to do this with my tenants when they take our rental.

You brought up a good point about the deposits. Now I am wondering this too, but I really do not know about that. I know my tenants had the deposit specified in their lease, and that lease is with me.

[ValleYum]

AFAIK, the deposit is you as the Landlord and them as Lessee - the bank wouldn't have anything to do with their security deposit.

Out of curiosity, did their lease begin before or after your BK?

[Sweetpea3829]

Their leases both began well after the bankruptcy. The house was discharged in April of 2007 and 2nd floor began his rental period in the summer of 2009 and third floor just joined us this past October. Both are great guys (except perhaps that 2nd floor uses an electric heater to avoid raising his gas bill while we foot the electric bill and the guy certainly isn't hurting for money), and we want to make sure they are not screwed over in any way.

I think what I'll do is tell them to keep their next rental payment as their deposit.

We have not yet told them anything yet. They do not know (unless they've overheard) that we are moving, they do not know that we are in arrears, they do not know that we are considering a short sale, DIL, or to just let it run the foreclosure road. It's a balance...tell them now and they may stop paying.

We are only considering these short sale and DIL options to get ourselves into a single family sooner rather than wait for the foreclosure to play out. Ideally, we would have loved to have collected rent for the next 18 months while the foreclosure plays out. If the short sale or DIL fails to open the path for us to get into a single family home...and we've told these guys to stop paying rent...well now we have no home AND no rent.

Trying to balance it out while doing right by those guys.

[ValleYum]

Sweetpea? I am *not* a Realtor nor an attorney - but I have worked in Property Management for over 15 years. Make sure you do right by yourself FIRST.

Do you have written leases with these guys? If so, does it spell out what you do with their deposit and the conditions under which it will be returned? Does it spell out termination of the lease, etc?

I would NOT let them skip rent in lieu of returning their deposit. You NEED to make utterly sure you can prove you paid it back to them or they likely can sue you and get a judgement in small claims or civil court (not 100% sure of your state's Landlord-Tenant laws). And I am pretty sure you would be stuck with paying a judgement if they won in court.

I would follow to the letter whatever your lease says about terminating their lease as well. Personally, I would send a CMRRR written notice (following the timeline outlined in your written lease to the letter) to cover my fanny.

This is just my .02 worth. I hope it all works out well for you! Keep us posted.

[Sweetpea3829]

We do have written tenant-at-will leases with both tenants. Both describe the security deposit and that it is not to be used as last month's rent. Ideally, they will stay through and evicting them will be the bank's problem, kwim? The bank has to give them 90 days, correct? They're good guys...I don't foresee that they will fight an eviction...in fact, I'm fairly certain 2nd floor will bail the first chance he gets when summer is upon us...he's a school teacher and he hates moving and I know that he would prefer to do something that he hates when he has no other obligations (like a classroom) to take care of.

Good point on covering our rears with the security deposit...hadnt' thought about them claiming we hadn't paid them the deposit back. I dont' think either fellow would do that, but it's not a chance we want to take. So when the time comes to cut ties, we'll do so with a papertrail.

Right now...the guy that we bought this house from is entertaining the notion of buying it back...lol. He'd have to purchase it at short sale but he's interested. If that works out, the 2nd and 3rd floor would surely be able to stay...he wouldn't kick them out, they're like, the perfect tenants.