Sell and Rent Back to Avoid Repossession

The prospect of losing your home through repossession is terrifying, and any option that can avoid this should be considered carefully.

A relatively new industry has sprung up in the last few years, offering a way to stay in your home and avoid repossession, even if you can't afford your mortgage - a scheme known as Sell and Rent Back.

The basic idea is that a property speculator will buy your home, usually at quite a way below market value, and allow you to carry on living there as a tenant, paying rent. The sale will happen quickly enough to pay off your mortgage before repossession proceeds begin.

Should you consider going down this route?

Advantages of Rent Back Schemes:

Firstly, you get to stay in your home and avoid the trauma and disruption of having to find somewhere else to live.

You'll also avoid the stain on your credit file of repossession, which will make getting a mortgage in the future extremely difficult.

Disadvantages:

The price you get paid for your house will be below market value - often by quite a margin. This is just something you have to put up with, as it's a trade off against the speed of the sale needed to keep the mortgage company from enforcing repossession.

You may also find that you're simply swapping an unaffordable mortgage for unaffordable rent payments, and turning the threat of forelosure into the threat of eviction for rent arrears.

There also still remains the possibility of the house being repossessed if the new owners default on their mortgage or have other significant business debts which you have no control over.

The most dangerous aspect of these schemes though is that although you may be led to believe that you can stay in your home for an unlimited time, and even buy it back when your situation improves, this isn't necessarily the case.

Your tenancy agreement may only last for a period of 12 months or so, after which your landlord has every right to serve notice that your tenancy will end - and you'll be required to leave your home.

That's not to say that all rent back companies operate in this way, but considering that the whole industry is at the moment unregulated, there is always this possibility.

So Is It Worth It?

Any alternative to repossession may seem attractive, but while Buy and Rent Back schemes might seem like an easy way out, there are significant problems and drawbacks you need to avoid.

If you decide to go down this route, make sure you choose a reputable company to deal with, preferably one with a reputation you can verify, and make sure you get a reasonable deal with a sensible price paid and guarantees built into your tenancy agreement that you can stay in your home for a good length of time.

Sell and Rent Back to Avoid Repossession

Advantages of Rent Back Schemes:

Disadvantages:

So Is It Worth It?

Related Articles: