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Sell and rent back housing - pros and cons

Sell and rent back housing

Sell and rent back housing is causing something of a stir.

The phenomena involves selling your home to a third party, but then going on to rent it. You don't move out. At least not right away.

Effectively the former homeowner becomes a tenant.

This kind of arrangement has become more popular over the last five years. And so with its rising popularity, the number of professional property buying companies has grown.

 

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Homeowners see "renting back", as one way of getting immediate access to the cash tied up in their house. Others are looking to reduce their monthly outgoings. As you might expect (ultimately) there's usually a financial reason for going this route but the "trigger" could be some or any of a hundred and one different things.

So far so good.

But sell and rent back housing isn't popular with everyone. Certainly not estate agents. Properties which become rent back housing are not sold through estate agents. Rather the homeowner sells their home directly to a professional cash property buyer.

And with the number crunchers telling us repossessions are running at record levels and millions of homeowners experiencing or about to experience interest "rate shock", the press is naturally curious about it.

 

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Sell and rent back housing in the press

A recent BBC piece Stretched homeowners eye rental option featuring quotes from two or three established property buying companies was partly a call to action ("the industry should be regulated"), partly a PR piece for the companies involved  and partly a warning to homeowners to be circumspect. A piece in the FT around the same time How to keep the roof over your head was not dissimilar. Coincidence?

 

The pros and cons of sell and rent back housing   

It is irresponsible to ignore the pitfalls of sell rent housing.

The sector is not currently regulated. It should be. Regulation will come. The industry needs to be prepared for and accept scrutiny and any "bad eggs" exposed.

There are a great many small companies, and a few national homebuyers (mainly franchises). Ultimately you're likely to be dealing with an individual property buyer.

 

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When you move into the rent back sector it's not unlike marriage. Or indeed, weighing up a potential business partner. You have to find a house buying company you're compatible with. If you're not on the same wavelength - forget it. It's inevitable, no matter what paperwork's involved, that sell and rent back housing involves some degree of trust.

The vast majority (but not all) professional homebuying companies want to re-sell a property within five years. By itself, there is nothing improper in this.

 

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Each property buying company will have it's own buying and selling criteria. All businesses need rules. And just like people, some are more flexible than others.  But what the press is hinting at is that you may think you have agreed one thing..only to find yourself out in the street somewhere down the line.

Like any financial arrangement you must take proper safeguards. This includes clarifying the length of the agreement in principle, future rent levels and so on. If you're after something specific you must ensure any sell and rent back housing meets your criteria.

 

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But, and it's a big but, if you're looking for a "lifetime" arrangement or an agreement which covers at least X years you must make this clear and if necessary get appropriate safeguards written into the contract regardless of the short term nature of the tenancy agreement itself.

And if you're not getting what you want in black and white, move on. Likewise, future rent increases. And should the property need to be sold find out if the buyer is taking any responsibility for finding you similar alternative accommodation or offers a sensible buy-back option.

 

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Homeowners in receipt of benefits also have a need to be cautious. It's important to make a thorough assessment of what the sell rent option means for your future benefit entitlement. If you live in an ex-council property you may have to find out whether you have to pay back any of the discount you received when you bought your home. A Northern Ireland Housing Executive news release on the pitfalls of sell and rent back housing, although specific to Northern Ireland, covers this ground well.

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You also need to consider the longer term implications of opting out of the property market. Once off the property ladder it might be very difficult to get back on again. This may not be of concern to older homeowners but could or should be for others.

 

Finding out more about the pros and cons

 

We know there is huge demand for sell and rent back housing but pretty little by way of balanced information available. If you'd like to find out more about the pros and cons of sell and rent back housing in Scotland or England and Wales call us on 0800 043 0669.

We don't use call centres and don't employ sales people so there's no "sales pitch". Just friendly professionals who'll either answer your specific questions or give you a balanced assessment. 

 

 

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