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President’s Corner Would nation’s largest lenders back a massive ‘Cash-for-keys’ program?

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Kerry Suess

Posted: Saturday, April 2, 2011 7:31 am

In a story titled “U.S. Banks in ‘Cash for Keys’ Foreclosure Talks,” Financial Times, the nation’s five largest U.S. mortgage service providers were asked by regulators in a private meeting chaired by the Federal Deposit Insurance Corp. this week to consider an industry-wide “cash-for-keys” program, in which they would pay borrowers who have stopped making their payments up to $21,000 each to leave their home.

In the proposal, banks would offer delinquent borrowers, who are more than 90 days behind on their payments, an incentive to leave the home quickly and in good condition.

If banks agreed to the “cash-for-keys” program, they would pay defaulters up to $1,000 to get independent financial advice and up to $20,000 as a “fresh start” payment toward living costs in a new home, the Financial Times reports, quoting unnamed sources. The idea was raised by Sheila Blair, the FDIC chairman, but is not yet an official government proposal, the Financial Times noted.         

Some banks are pursuing other options as detailed in “Banks Fixing Up Foreclosures to Spur Sales; Strategy Aims to Give Them Broader Appeal, Reduce Big Inventory,” The Chicago Tribune reports. More banks are investing thousands of dollars to fix up foreclosures in trying to spur sales and appeal to a broader buying pool. Banks have inherited plenty of foreclosed homes that have everything from water damage, mold, broken windows, and missing plumbing fixtures. But while banks used to be hesitant to invest much money in fixing up these homes, more real estate pros say that banks are heeding their suggestions for repairs and seeing the benefits of how a little investment can make these properties more sellable. As such, they are paying for new paint and carpet, refinishing damaged floors, replacing old windows, and repairing leaky roofs.

These banks hope to extend the foreclosed homes’ appeal beyond the traditional investors and professional rehabbers. For example, home buyer would have trouble securing a mortgage on homes that lenders deem “uninhabitable” because of needed repairs.

The bank’s interest in fixing up these properties also can help the overall real estate market because the foreclosed properties can sell at a higher price. Real estate agents say they are making more suggestions to banks on how to spruce up the properties. First, they identify the target customer for a property. For example, if the home will likely appeal to an owner-occupant, Realtors may recommend fixes such as anything from paint up to a full kitchen remodel.   

Whether you end up buying a property that was foreclosed or not, fixed up or not, it doesn’t pay to get in a hurry to move in. Many sellers today are not in a position to maintain their property and banks aren’t familiar with the property. Don’t miss out on the opportunity to have proper inspections and a final walk through. It’s guaranteed to be hectic right before closing, but you should always make time for a thorough final walk-through. Your goal is to make sure that your home is in the same condition you expected it would be. Ideally, the sellers already have moved out. This is your last chance to check that appliances are in working condition and that agreed-upon repairs have been made. Here’s a detailed list of what not to overlook for on your final walk-through.

  • Make sure that repairs you’ve requested have been made.
  • Obtain copies of paid bills and warranties, and make sure there are no major changes to the property since you last viewed it.
  • Be sure all items that were included in the sale price like draperies, lighting fixtures, etc. are still there.
  • Screens and storm windows are in place or stored.
  • Check that all appliances are operating
  • No plants or shrubs have been removed from the yard
  • Heating and air conditioning system is working.
  • Garage door opener and other remotes are available.
  • Instruction books and warranties on appliances and fixtures are available.
  • All personal items of the sellers and all debris have been removed.
  • Check the basement, attic, and every room, closet, and crawlspace.

It is always best to work with a professional Realtor. They will make sure you are aware of all the inspections available to you. A Realtor will make sure all your time frames are adhered to and will make sure that you take advantage of the opportunity to have a Final Walkthrough. Realtors maintain a Code Of Ethics that is loosely based on the Golden Rule. They should protect your interests as if they were buying the property themselves. Use a Realtor and enjoy the benefits of Home Ownership.

Questions or comments can be made to Kerry Suess at