A Deed in Lieu of Foreclosure and Cash for Keys are terms that are pre-foreclosure options and have become more popular in this real estate market. They are options for homeowners and lenders to agree mutually to give back the property and avoid traditional foreclosure proceedings.
The difference in the two options is simply a cash contribution. In a Deed in Lieu of Foreclosure, the homeowner in default just agrees to give back the home without making the bank foreclose and leave it in good condition. The Cash for Keys option is essentially the same; however the lender may offer a cash incentive for the homeowner to deed back the house and leave it in good condition without waiting for the entire foreclosure process. These options offer several advantages to the homeowner in default as well as to the lender.
For the homeowner it allows forgiveness of the remaining debt from to the lender, avoids public notoriety of being foreclosed on and evicted, and finally may have less negative effect on their credit.
The advantages these options have for a lender include a reduction in the time and cost of repossession and less chance of homeowner revenge like metal theft and vandalism of the property before the eviction.