Keys for Cash

[Katharine Chartrand]

I just bought my first house at a foreclosure auction today after 3 attempts on other properties. I've been flipping REOs so far. The auctioneer was inexperienced, lost (could not find the correct legal location of the auction, I had to call her on her cell), could not pronounce "situated", read the entire legal description down to the manhole cover on the SE corner of the property and was personable and pleasant. Weirdest way to buy a house ever.

The owner is living in the house. I tried to contact her a few times before the sale to try to implement one of the pre-foreclosure strategies. Hand written notes. I did not have the nerve to knock on the door. She never responded.

Now I own the house and she is in it.

Can someone outline the key elements of a keys for cash agreement in a foreclosure situation. I imagine they have to agree to

• Leave by a certain date.
• Give up their right of redemption
• Agree than anything they left behind was abandoned and can be discarded or given away.
• Hold me harmless for anything that happens to them while they remain in the house.

Have i got it covered. Anything missing? Any agreements out there I should look at?

Any other approaches or advice to consider. It was my fourth auction, but the first time I actually came home with a property.

[Tom V.]

Hi,

I have purchased a couple of houses in California and found myself in the same situation. In my experience, your best course will be:

-Wait until you receive your trustee sale deed in the mail and record it before reaching out again. Typically this is 10-15 days in California. Once the deed is recorded there is no ambiguity. In between there is time for shenanigans by the owner or the owner's lawyer. (Gut wrenching days to wait after the crazy auction lady took your cashier's check, right?)

-Once you record your deed, bring a copy of it with you and either try to speak to the occupier, and bring a polite but firm letter and post the letter and a copy of the deed on the door. "Dear XYZ, in an auction on ABC date, my company DEF purchased the property at 15 Magnolia Lane. I need for you to contact me at 123-4567 or at youraddress(at)email.com at your earliest convenience so we can discuss your plan to move out." When people see the trustee deed and your letter, they pretty much know the game is over.

-If you don't hear from them, you need to post more formal notice (3 days to quit for foreclosure) and consider legal options.

I have hired a lawyer to draft cash-for-keys agreements for me. I may have been overcautious, but I know from a title insurance perspective I felt in better shape with a professional document releasing all claims from the prior owner than something I cooked up myself.

Don't forget to play nice and be empathetic. Your worst case scenario now is that the occupier flushes a bag of concrete down the toilet or burns the place to the ground. Try not to set anyone off.

People do need time to move and my experience tells me people who are in foreclosure often crawl into mental shells of denial to protect themselves emotionally. You have now become the embodiment of the change in the their lives they have been dreading for months (probably years). Be cool. Treat the person decently and think about how you can solve their problem. You might want to offer to pay for a moving truck and 2 months of storage for their stuff as an opening salvo instead of cash for keys.... If you got possession in 30-45 days after the auction, that would not be a bad outcome as far as I am concerned.

The forums at foreclosureradar.com have a lot more foreclosure-specific advice.

Congratulations by the way! Hope it was a good deal.