There is some concern from the Citizens Advice in the UK that companies offering sell and rent back deals may be exploiting homeowners who are in arrears with their mortgage repayments. Such companies offer homeowners the chance to sell their property quickly for cash and then remain in the home by paying rent. For those who are faced with the prospect of having to move out of their home it may seem to be the perfect lifeline. While there are some ethical companies out there offering fair deals, some offer way below the market value, which in some cases is just a quarter, of what the property is worth.
Some homeowners who are facing desperate financial struggles with mortgage arrears and other debts, which have piled up, only see the chance to sell and to remain in their homes and so sign over their homes. Some individuals have been under the impression that they are able to stay in the home by renting for as long as they want and then have found out 12 months later this is not true. Some have signed agreements promising affordable monthly rent payments only to see their rent jump up drastically within 6 months, with some being faced with having to find rent that surpassed the mortgage repayments they struggled to maintain. Of course, if tenants cannot afford the rent they have to move out, which leaves them in the same position they were in before and worse still, the property may then be sold by the property buyers for a huge profit.
The amount of homeowners who sell their homes this way has increased with the recession and job losses being upon us. However, the Citizens Advice has reported that many homeowners seeking this option as a way of avoiding repossession have regretted the decision. They stress that if you are in mortgage arrears and are considering selling your home this way to look into the agreement very carefully before rushing into signing.
The Financial Services Authority has recognised that there are less than ethical companies out there, who seem to give out false promises to homeowners and are clamping down on offenders. Companies have advertised on TV, in leaflets through letterboxes and on websites, that you can get cash for your home to pay off bills and avoid repossession of homes. They make it sound so easy and of course, for those who have little by way of options left open to them; it can be very tempting to sell for a lot less than the asking price if they believe they are able to stay on in the property for life.
However, this is not to say that all companies who offer homeowners the chance to sell and rent back are devious. There are companies out there who do state that you sell for less than the asking price and that there is no guarantee as to how long you are able to rent. Selling your home this way to avoid repossession can be a win win situation, providing you know what you are entering into and you go into the deal with your eyes open.
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