Marcus Robbins 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.
Common in the UK, a sell and rent back (also known as a sale and rent back) is when you sell your house and rent it from the new landlord. This allows you to free up cash and potentially avoid foreclosure while still residing in your house, even if you are in mortgage arrears.
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. Naturally, there are disadvantages to this strategy too. But they're minimal compared to the relief that a sell and rent back strategy might provide. They're also far less consequential than a repo, bankruptcy, or foreclosure.
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. You will still be responsible to meet your monthly rental payments, which could exceed the cost of your previous mortgage, depending upon how paid down your mortgage was.
Additionally, your rental agreement will consist of a term that may require you to move out after it expires. 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.
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