If you’ve fallen behind on your mortgage, you’re probably frantically looking for solutions. You may have heard of one strategy that’s unconventional in nature, but happens to have a nice potential payoff if successfully executed. The sell and rent back strategy (often deployed in Great Britian) allows you to sell your home, only to quickly turn around and rent it back.
Is it a good idea to sell your house and rent it back? Let’s take a look.
Many homeowners become emotionally attached to their residence, doing whatever they can to avoid leaving it. The sell and rent back strategy keeps this sense of home intact, as the buyer of your home will agree that upon buying your house, he’ll immediately rent it back to you. The terms will be pre-negotiated, all contingent on the sale of the home.
Another advantage is the fact that all past due monies owed to your bank will immediately become the responsibility of the buyer. If you’re four months behind on your mortgage, you’ll no longer owe that money to the bank, even after the sale of your home. The buyer and the bank will be responsible for working out a plan that satisfies these unmet obligations.
The disadvantages of a sell and rent back are probably minor compared to the risks run by bankruptcy, repossession, and of course, eviction. When you rent back property ideally you avoid all of those pratfalls.
You’re also likely to get something far less than you’d normally get for a sale price, as your desperation to sell your home quickly will force you to accept a lower price.
Also, bear in mind that this rent back home part of a sell and rent back means that you are a renter, and when your rent agreement runs out, you need to renew it or find a new place to live.
As you can see, the sell and rent back strategy is one where the homeowner attempts to make the most of a situation gone bad. It’s certainly worth attempting to pull off if it can be done, as the relief is definitely greater than the damage.