Cash for Keys

Cash for keys means giving a tenant cash or a check in exchange for the keys to a property the tenant is being asked to vacate. While many landlords prefer offering their tenants cash for keys instead of going through the eviction process, it can have its downsides.

Table of Contents:

The Appeal of Cash for Keys

Not only is “cash for keys” a catchy phrase, but many landlords swear by it, and it’s not hard to see why. When it works, tenants are removed from a rental unit/foreclosed home in less time than an eviction takes in some states, and for less expense.

Saving Time

In many states, the quickest non-emergency evictions can still take up to 4 weeks, depending on the state.

While expedited/emergency evictions typically move more quickly than a state’s normal eviction process, they can often only be done if the tenant poses a serious threat to the rental unit/other people, or has been involved in criminal activity.

Of course, evictions can take much longer than 4 weeks, too, and in some states, they can last for several months, depending on the reason for the eviction.

Because of this, many landlords are more than willing to offer tenants cash to move out within a much shorter time frame, such as a week. And if you find yourself in the uncomfortable position of dealing with a squatter, offering them cash to leave could get them off your property quickly.

Saving Money

While paying a tenant to move out may not seem like a great money saver at face value, when you factor in how much going to court to evict a tenant or resident of a foreclosed home could cost, it may actually be the least expensive way to get the property back.

Keep in mind that evictions can include any of the following fees and costs:

  • Filing fees to file the initial eviction documents with the court
  • Attorney fees
  • Service and/or publication fees to ensure the eviction notice is given to the tenant
  • Service and/or publication fees for the court summons and eviction complaint
  • Fees to issue the eviction order
  • Fees to have law enforcement remove the tenant after the eviction order is issued
  • If the court rules in the tenant’s favor, there may be fines/fees that the landlord is ordered to pay to the tenant

It’s no wonder that many landlords would prefer to offer their tenants a one-time payment to move out of the property and skip all the costs associated with an eviction.

How the Cash for Keys Process Works

While it seems straightforward enough, cash for keys involves more than just handing your tenants some money and walking off with the keys to the rental unit/foreclosed property.

Decide What Amount to Offer

This is really up to the landlord or property owner to decide, but can be anything from one or two months’ rent to a flat amount, such as $500. A good starting point is to estimate how much an eviction hearing would cost, and then work backwards from that amount.

Determine an amount that you as the landlord/property owner feel comfortable offering the tenant. Whatever you decide to give the tenant, try to make sure it’s reasonable and fair in light of the current condition of the rental unit, the tenant’s history in the unit, and how much time is left on their current rental agreement/lease.

After all, you’re asking them to vacate the property in a very short amount of time, and some tenants could be quite surprised that they’re being asked to move out before the lease is over.

If the initial offer is too low, the tenant may balk and refuse to move out or try and negotiate with you.

Discuss the Offer

This may be the most difficult part of the process, depending on the type of relationship you’ve had with the tenant/resident up to this point.

Let them know that you’ll be asking for the rental unit back before their lease is officially up—or that you’re thinking of filing an eviction action against them, and explain why (even if you believe they should already know why).

Then explain that you’re willing to offer them compensation to move out early or to move out instead of being dragged through the court’s eviction process.

This may be easier for tenants to swallow if they understand that an eviction record will make it more difficult for them to find other housing and can stick with them for a long, long time.

Be honest about how much you’re willing to offer, and any conditions that come with the money. For example, if you expect the rental unit or home to be completely cleared of all personal belongings/trash in order for the tenant to receive any money, let them know that up front.

Put It In Writing

This is the most critical part of the process—make sure that you put any agreement about exchanging cash for keys with the tenant in writing. The written document should include:

  • How much you’re paying the tenant to leave the property
  • The date by which the tenant must move out
  • The condition you expect the property to be in for the tenant to receive any money
  • The fact that the tenant is exchanging the keys to the property and the right of occupancy for the agreed upon dollar amount
  • When and how the tenant will receive the payment (from you at move out, mailed within a certain number of days, etc.)
  • Your signature and date
  • The tenant’s signature and date

This way, it won’t just be your word against your tenant’s when the agreed upon move out day arrives. If you do move forward with an eviction, you may want to include the written cash for keys agreement as part of your evidence for the court.

Be Prepared to Follow Through

In the event that the tenant is unable or unwilling to fulfill their end of the written cash for keys agreement and move out of the property by the date specified, landlords/property owners should be prepared to go through with the formal eviction process.

Whatever you do, however, do not attempt to physically remove the tenant from the property yourself. This is called a self-help eviction, and is illegal in nearly every state. If you do attempt this, you could end up having to pay the tenant for damages and may be required to allow them to remain on the property.

Tips for Landlords

As a landlord, if you’ve come to the point that you’re willing to exchange cash for keys, it may be safe to assume that you’re desperate to remove the tenant. Don’t let the tenant sense your desperation, however, or the process may not go very smoothly.

Set a Firm Amount

Some negotiation with the tenant over the amount you’re willing to pay them to move out is fine, but make sure you have a firm limit on what you’re willing to pay. Otherwise, a tenant with strong negotiation skills may end up costing you more than an actual eviction would.

You also don’t want to make the tenant feel like you’re just toying with them by playing price games.

Know what you’re willing to pay, allow the tenant some room to negotiate if you’d like, but be firm about your limits.

Set a Fair Amount

Not all tenant removal situations are the same. You’ll want to factor in how difficult it will be for the tenant to find new housing in a short amount of time, as well as the following:

  • How much time is left on their lease/rental agreement (more time means more cash offered)
  • The current condition of the property
  • How many people are being asked to move out
  • Any other special considerations for that tenant

Understand that there may be fewer housing options available to seniors or people with disabilities on short notice, which may mean giving the tenant a larger payment amount.

In addition, families with school-aged children may find it more difficult to relocate quickly, since they’ll likely need to find housing within the same school district.

Remember, one size doesn’t fit all in this situation. Do your best to be fair to the tenant, no matter how you feel about them personally.

Don’t Take Their Word For It

Always get any cash for keys agreement in writing. While it may be tempting to accept a verbal agreement just to rush the process along, that could be a huge mistake.

If the tenant doesn’t move when they said they would, there’s no document to prove when you told them to leave, or what condition the property was supposed to be in for the tenant to receive the payment.

Without a written agreement, you may end up being forced to pay a tenant for leaving you with a damaged rental unit/home, or one that will take weeks to clean up.

Be Sure the “Tenant” Is Really the Tenant

In some cases, like removing a tenant from a home that’s been foreclosed, the property owner or new landlord may not recognize the tenant by sight. In those instances, it’s a good idea to ask for some form of verification to ensure that you’re signing a cash for keys agreement with the actual tenant.

It may seem farfetched, but there could be a squatter on the property, or you could be making a deal with the tenant’s family member or guest, only to find out on move-out day that the actual tenant has no idea what’s going on and didn’t agree to any cash for keys arrangement.

NOTES


Security Deposits.
Even though you’re offering your tenant the chance to move out in exchange for cash (or a check), that doesn’t necessarily mean you can hold on to their security deposit. You’ll need to follow the laws in your state for returning the deposit, including deducting any amounts for damage/repairs to the unit (if allowed by state law).

Tips for Tenants

As a tenant, you need to be aware of your rights if you’ve been offered a cash for keys settlement, and should make sure that the offer is fair and legal.

Know Your Rights

Tenants cannot be evicted simply for refusing to accept a cash for keys offer. Most states have specific rules about when a tenant may be evicted, and landlords who try to evict tenants in violation of those rules may be required to pay fines to the tenant (or the court) and may also be required to allow the tenant to remain at the property.

You may be given more time to move out in your state’s eviction laws than what the landlord is willing to give you in a cash for keys offer. Understand what your rights are as a tenant before signing any rights away in a cash for keys agreement.

In addition, you may still be entitled to your security deposit, so don’t assume that just because you signed a cash for keys agreement, you’ve signed away your security deposit, too.

Understand What’s Fair

Tenants aren’t required to accept the amount offered by the landlord/property owner, and can attempt to negotiate.

If the amount seems too low, see if they would be willing to offer more—but be prepared to explain why you, as the tenant, feel a bigger offer is necessary. Typically, the more time left on your lease/rental agreement, the larger the offer should be.

There may be factors that would make it harder for you to move immediately, such as physical health, age, or family status. Be up front about your concerns when negotiating the payment amount.

Get It In Writing

Make sure the landlord/property owner puts the details of the cash for keys agreement in writing—including the date you’ve agreed to move out, how much you’ve agreed to receive for moving, and anything you’re required to do in order to get the full amount, such as cleaning the property.

If there’s anything in the agreement you don’t understand, or anything that’s different than what you agreed to—don’t sign it. Ask the landlord/property owner to clarify anything that’s unclear or to correct anything that’s incorrect.

Leave a Forwarding Address

You’ll want to give your former landlord or the property owner your forwarding address, just in case they need to get in touch with you after you move out of the rental unit/home, or if they need to mail your security deposit back to you.

Cash for Keys Agreement Form

Get the downloadable pdf Cash for Keys Agreement form template below (.pdf direct link).

Check out the Word version of the form here.

Things to Remember

Cash for keys can have its advantages—as long it’s fair, makes sense, and ends up saving everyone time and money.

  • Cash for keys is often faster and less expensive than going through the eviction process.
  • Landlords and tenants should put the cash for keys agreement in writing.
  • Tenants are not required to accept a cash for keys offer.
  • Security deposits may still be owed to the tenant, even if a cash for keys offer is accepted.
  • Landlords/property owners should be prepared to follow through with the legal eviction process if tenants don’t abide by the cash for keys agreement.