Rent-Back Sales: Another Option in a Difficult Market

Theres no doubt that times are tough, especially for those trying to sell their homes. Enticing advertisements like We Buy Ugly Houses can catch the eye of a homeowner eager to avoid foreclosure, leading them to participate in a quick sale and rent-back situation. Like any real estate transaction, there are both advantages and disadvantages to this scenario, and its important that homeowners understand all the ramifications before jumping into something that might not be as good as it seems.

WHAT IS A RENT-BACK SALE?

A rent-back sale general involves a quick sale of your home to an investment company that will then look for another buyer. While the company does this, you may be allowed to stay in your home but you will need to pay rent. The rent is usually at market rate for your area, but as your rental will most likely be short-term, you may pay several hundred dollars extra each month.

When you participate in a rent-back sale, its important to recognize that you may take a loss on the property. If you need to sell quickly, and would like the advantage of being able to stay in the home for a short while after the sale, a rent-back sale could be to your advantage despite the potential loss.

WHO IS IT FOR?

If foreclosure looms, a rent-back sale might seem like a good way to buy some extra time. Todays economy means that many people are being forced to make hard decisions, but if youve lost your job, outspent your income, or are planning a divorce, it might be to your benefit to take a potential loss on your property in order to sell quickly.

Some parents might find an advantage to being able to stay in their home and allowing their children to finish the school year before moving. Moving is a stressful time, and avoiding a mid-year switch for kids can be a real benefit.

If youre considering building a new home, a rent-back sale gives you the cash you need to start building right away, and the flexibility to stay in the home throughout construction, giving you a cushion during those inevitable construction delays.

You might also find a benefit to a rent-back sale if youre ready to start looking for a new home, and want to be sure you have the cash on hand when you find the right place, without waiting for your existing home to sell. If youre downsizing and dont expect to need as much money for your new place, a potential loss might be offset by the freedom to move quickly when you find your new dream home.

WHAT ARE THE DISADVANTAGES?

There are some important issues to be aware of when considering a rent-back sale. First and foremost, understand that you are selling your home to an investment company whose main priority is to find another buyer. When that new buyer comes along your rental period will most likely come to an abrupt end, leaving you little or no time to find a new place to live. Its important to determine what type of notification youre entitled to before a new owner takes possession.

In a rent-back sale, the house is often sold as-is, meaning the buyer agrees to take on any necessary repairs. However, what if something happens while you are in your rental period? Are you responsible for those repairs? Is the investment company responsible, or the new buyer? Be sure to address these issues up-front to avoid legal problems later on.

IS IT RIGHT FOR ME?

Only you can determine if a quick sale and rent-back is right for you. Take time to learn everything thats involved, and dont be afraid to ask questions. Even if youre feeling a bit desperate to sell your home, a regular sale may still be best for you. Its a big decision, so take your time and do it right.



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