The Pros And Cons Of Selling And Renting Back
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.
This article will take a closer look at the strategy to determine its effectiveness.
The big advantage of a sell and rent back is that, given a willing buyer, you will not have to move – at least in the short term. As part of the sale agreement, the buyer gives you not only money, but also a rental agreement. This sell and rent transaction is actually two transactions rolled into one.
Another advantage of a sell and rent back is that any debt on the house is transferred typically to the new owner. If the house is in mortgage arrears the lender may be willing to work out a payment schedule with the new owner instead of you, which means that you may avoid repossession.
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.
However, you should realize that the sell and rent back scheme is going to necessarily mean that you will get less than market value for your home, as this quick sale instead provides you the benefits above.
Failure to do so will have the same ramifications on your credit that missing a mortgage payment did. You’ll also be signing a rental lease that eventually winds down, meaning that your time spent in your existing home may be limited.
All in all, the benefits generally outweigh the cons considering the risks of not acting on a situation that’s forcing you to miss your monthly home payments. This is a strategy that should definitely be considered if possible.
Mitchell Pratt is a real estate enthusiast who tries to see the good in every bad situation. He loves to help those in need with free advice at his blog, where he discusses issues such as the sell and rent back strategy and how to execute a quick house sale.