The property market is far from recovered with a large amount of bad debts and also growing interest rates. As a result of this there has been an increase in sale and rent back companies coming into the market specifically targeting overstretch homeowners who have mismanaged their finances.
The way a sale and rent back company operates is to allow homeowners to sell their properties to them at a discounted rate and then the sale and rent back company will rent the property back to them at the market rate.
Obviously one of the downsides to this is that homeowners will be selling their properties for many thousands less than it is actually worth however a sale to rent back proposal can be very appealing to a borrower who has got himself or herself into arrears.
Another huge advantage of this is that these deals can be done extremely quietly with no need for neighbours or family to know about it and this can appeal to many people who do not want the embarrassment of people knowing they are in a difficult financial position.
One thing all homeowners need to know is that these sale and rent back companies are unregulated and this means many of them are looking to turn a profit from another who is in financial hardship.
To give you a better understanding of what a sale and rent back deal looks like we will go into slightly more detail about what one entails. A sale and rent back company will basically purchase someone's home for 60% to 70% less than the market value. They will usually cover all the fees and costs that come with selling a home for you which again adds to the attractiveness of the deal.
The next stage is the sale to rent back company will rent the property back to the original homeowners for either the market rental rate or in some cases less than that if the mortgage repayments were less than the current market rental rates.
So this whole process allows people to essentially sell their property without having to move and the sale usually gives people enough collateral to pay off mortgages and get themselves out of debt. Some sale to rent back companies will allow for a clause that gives the original homeowners a chance to purchase the property back at a later date for the market value.
Selling a home for many thousands of pounds less than it is actually worth to many people would seem very unappealing however if you are facing mortgage arrears and the fear of repossession then this can be for some a simple way out of their troubles.
Also these sale to rent back companies do offer discretion which means family and neighbours do not need to know about the change in ownership. Furthermore children who go to a local school can continue to attend that school whereas if they moved they might not be eligible to go to the same school if they had to move out of the catchment area.
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