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  • FIRST POST
    MSE Wendy
    Warning: Sale and Rent back schemes
    • #1
    • 19th Feb 08, 1:09 PM
    Warning: Sale and Rent back schemes 19th Feb 08 at 1:09 PM
    What is this all about?

    Sadly many people are struggling to repay mortgages at the moment. In many papers you'll now see sale and rent back schemes targetting people. Here as an alternative to repossession you sell your house to a company but then continue to live there paying rent.

    Is it any good

    BBC Radio 4s Money Box programme had a very strong feature on sale and rent back on its show on Sat 16 Feb outlining why for many people it's no where near as good as it sounds and can be quite dangerous.

    Listen to It: Money Box Story

    The problems with some providers can be serious. You could only get 50% of your home's value, the rental agreement mightn't be secure and there's even a risk that the person you sell the house to may have it repossessed themselves.

    For anyone thinking of doing this; its worth listening to the report.


    Further Information:
    • One on One Debt Counselling. If you're struggling to pay for your mortgage is to talk to your mortgage provider as soon as possible to explain your situation or you can call one of the free debt advice agencies:

      Free non-profit debt counselling agency the CCCS has a new dedicated mortgage team that can help if you have missed 2 or more mortgage payments, call it on 0800 138 1111. National Debtline, Tel 0808 808 4000, Citizens Advice, Tel no in your local phone book or Community Legal Advice, Tel 0845 345 4 345 can also provide advice.
    Please get help if you need it

    Wendy

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    Last edited by MSE Martin; 19-02-2008 at 4:41 PM.
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Page 1
  • homer_j
    • #2
    • 20th Feb 08, 10:37 AM
    • #2
    • 20th Feb 08, 10:37 AM
    http://news.bbc.co.uk/1/hi/programme...ox/7248439.stm

    I read this the other day, it is clear that there needs to be greater regulation in that area so there is greater protection for the people doing this.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • dunstonh
    • #3
    • 20th Feb 08, 11:03 AM
    • #3
    • 20th Feb 08, 11:03 AM
    it is unregulated and you are at risk of the landlord going under and your property being sold on to someone that then serves you notice.

    Like any business you will get good and bad apples. However, unlike regulated business, you have little or no come back if it goes wrong and there is no solvency requirements with these landlords. Some of them are almost certainly leveraged upto the hilt and it wouldn't take much to push them under.

    The business itself is high risk/high reward for the landlords unless structured with good capital adequacy. However, there is no body in place to make sure such capital adequacy exists.
    I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
  • nathanforrest
    • #4
    • 20th Feb 08, 4:23 PM
    • #4
    • 20th Feb 08, 4:23 PM
    I see that my comments earlier were removed. I wanted to make some key points to provide advice to people considering Sell and Rent Back. I hope my comments below will be to the satisfaction to the forum, which does not include any advert or reference to our company.

    This is not an advert!!!

    I purchase properties in the Yorkshire area along with my business partner. We aim for a purchase price of around 75% of the market value and prefer Sell and Rent Backs due to the fact that the existing owners would be more likely to respect the property, that we then don't have to actively seek new tenants, and that it causes minimal disruption to the existing owners. We need to achieve the discount to pay the relevant legal fees and so that there is a pot towards immediate/ongoing repairs. Unlike some other investors we generally fix the rent for a period of two years (if this is what the tenants want), we adjust rents after this period in line with market rates, we have good relationships with our tenants and have agreed payment breaks in the past. We also allow the home owners to contact our existing Sell and Rent Back clients if they so wish.

    We keep as much income generated from our investments in the business so that there is always funds available to cope with unpredictable repairs, etc. Some businesses tend to spend all the income and live the high life - this is a major contributory factor in relationship breakdown between the tenant and the business and is a recipe for disaster.

    If you are thinking of Sell and Rent Back do your research. Choose a reputable person(s) or business that is successful at what they do. Don't necessarily choose the cheapest deal. Get a few offers, meet with the prospective buyer(s) - this is essential. You can get a good impression of someone face to face. Ask as many questions as you can think of and ask to speak to existing clients of theirs.

    Hope this helps!
  • homer_j
    • #5
    • 20th Feb 08, 4:49 PM
    • #5
    • 20th Feb 08, 4:49 PM
    The point being Nathan Forrest is that even with what you say you do, there are no guarantees or protections for the tenant. You could give me the numbers of your granny or other tenants and I wouldn't know the difference.

    I do not want to take the topic into the particulars of every client but you will come across buyers who are not in a position to make a rational decision and these are the people that are most at risk.

    Your line of work needs regulation and it needs it fast. You are a business at the end of the day and if your tenant is no longer profitable, you will get rid and find someone that is.

    There should be stringent regulation and rules on the amount of liquid assets that you should maintain at all times within the companies. There should be an ombudsman scheme and some form of protection in place like the Financial Services Compensation Scheme, which will protect the tenant should the housing company go bust.

    Having strict operating guidelines and warranties that are sustainable will be the only way that you should be taken seriously.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • nathanforrest
    • #6
    • 20th Feb 08, 5:33 PM
    • #6
    • 20th Feb 08, 5:33 PM
    Thankyou homer_j. I am in full agreement that the market needs urgent regulation. From a business standpoint it can sometimes be an absolute nightmare to try and distinguish ourselves from other investors out there.

    Allowing investors the opportunity to be able to sign up to a scheme that is regulated creates more consumer confidence and can only be good for (good) investors and sell-and-rent-back tenants.
  • bamberbamboo
    • #7
    • 20th Feb 08, 5:41 PM
    • #7
    • 20th Feb 08, 5:41 PM
    A lovely couple in our road sold there house last year, we saw it on one of the property price sites and thought it was odd that they still lived there and they had sold it end of 2006, anyway before xmas they asked if we knew anywhere they could rent, now they had the nicest biggest house in the road and I asked why they would want to leave their lovely house and hey !! they had sold it last year and where renting it back, but after ther first year was up the landlord had put their rent up so much they couldn't afford to stay, heartbreaking, they had to find homes for all their pets and have moved into a not nice type of terraced house that looks really shabby, what I'm trying to say is they must of had their reasons for doing this, but then to loose their home anyway is awful.
    a please & thank you is all it takes
  • homer_j
    • #8
    • 20th Feb 08, 5:49 PM
    • #8
    • 20th Feb 08, 5:49 PM
    this is the one comment on the article that if anybody considering these schemes should read and consider.

    I represent mortgage lenders at possession hearings. In my experience many borrowers who have previously ignored the possession claim make eleventh hour applications to postpone eviction on the basis they are selling to a buy to let company. These schemes allow borrowers to continue their state of denial of what is happening to them to the extent that they refuse to acknowledge that the property will no longer be theirs. They see it as a way of staying in "their" home. In fact they will never be able to afford the rent and will have given up whatever equity they have in the property. In almost all of the cases I come across the borrower would be better off with the lender taking possession, selling then passing any surplus proceeds to the borrower. What is most alarming is the number of cases where people have sold through these companies but the new owner fails to pay the mortgage leaving the once owner but now tenant high and dry with no standing even in the possession proceedings.
    Bob
    At the 75% price - even if you have to drop by 10% off the asking price, you are still keeping 15%.

    Its the emotional attachment that we all have with our homes that cost people a lot of money and make others more sometimes.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • toonfish
    • #9
    • 20th Feb 08, 5:50 PM
    • #9
    • 20th Feb 08, 5:50 PM
    most folk desperate enough to sell their house at 75% of it's market value and then rent it back could probably refinance themselves with the right help and keep their property.

    It's becoming a big business, but it does need urgent regulation
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it.


    This signature is here as I follow MSE's Mortgage Adviser code of conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.



  • chunkylegs
    Do you seriously believe that people have not already tried that my financial life fell apart 9 months ago and the bottom line is there is nothing you can do about it until it bottoms out. I was stupid but I am not stupid and believe me I have found myself in a situation I can not fathom. I earn over 40.000 a year and the powers that be are desperate to see me go to the wall.
  • dunstonh
    Do you seriously believe that people have not already tried that my financial life fell apart 9 months ago and the bottom line is there is nothing you can do about it until it bottoms out. I was stupid but I am not stupid and believe me I have found myself in a situation I can not fathom. I earn over 40.000 a year and the powers that be are desperate to see me go to the wall.
    Originally posted by chunkylegs
    Doesnt mean you should let any shark transact in this area. The consumer has the potential to be right stitched here more than any other financial area. Yet it is totally unregulated at the moment.
    I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
  • Doozergirl
    Can we have a sticky about this on the House Buying etc board please? We're asked several times a week about these schemes.
    Everything that is supposed to be in heaven is already here on earth.
  • homer_j
    no - go away.. Only joking.

    I believe this topic is more suited to the House selling board too..
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it. This signature is here as I follow MSE's Mortgage Adviser Code of Conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.
  • toonfish
    Do you seriously believe that people have not already tried that my financial life fell apart 9 months ago and the bottom line is there is nothing you can do about it until it bottoms out. I was stupid but I am not stupid and believe me I have found myself in a situation I can not fathom. I earn over 40.000 a year and the powers that be are desperate to see me go to the wall.
    Originally posted by chunkylegs

    if there is 25% equity in your propoerty I would be very surprised if it can't be sorted out without selling way under value, and I've seen some pretty desperate situations. Unfortunately these "property angels" that come to save you would rather you didn't know about the alternatives - all they want is a cheap house.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it.


    This signature is here as I follow MSE's Mortgage Adviser code of conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.



  • RepossessionAngels
    Sorry Toonfish, I would have to disagree. The company I represent, Repossession Angels, is keen to build long-term relationships with its clients and we would not be doing ourselves any favours if we didnt explore all the options available to our clients before proceeding with a sell and rent back transaction.

    The main options that are usually explored include re-mortgaging; swapping from repayment to interest only; a payment holiday; extension of the term; an estate/auction agent sale; help from friends/family. We ask whether the person(s) has explored them all (and will assist our clients in finding out) before we proceed to even discuss the possibility of sell and rent back. The unfortunate reality is that the majority of people that are facing repossession are those who have taken sub-prime loans and initial lower fixed rates which are hiked up after 2-5 years to a totally unaffordable rate, at which point the mortgage companies would point to the small print. We have found that they are, more often than not, unwilling to compromise.

    Having been recently communicating with the FSA and Office of Fair Trading, regulation of the industry is inevitable and we, along with must Sell and Rent Back Property Investors I have met, are welcoming it. We run credit, bankruptcy and CRB checks against anyone who wants to join the organisation as well as ensuring that the investor has sufficient capital backing should things go wrong (such as tenants defaulting, damages). We also offer separate long-term rental agreements (with compensation to the tenant should the SARB landlord breach the terms).
  • toonfish
    Sorry Toonfish, I would have to disagree. The company I represent, Repossession Angels, is keen to build long-term relationships with its clients and we would not be doing ourselves any favours if we didnt explore all the options available to our clients before proceeding with a sell and rent back transaction.

    The main options that are usually explored include re-mortgaging; swapping from repayment to interest only; a payment holiday; extension of the term; an estate/auction agent sale; help from friends/family. We ask whether the person(s) has explored them all (and will assist our clients in finding out) before we proceed to even discuss the possibility of sell and rent back. The unfortunate reality is that the majority of people that are facing repossession are those who have taken sub-prime loans and initial lower fixed rates which are hiked up after 2-5 years to a totally unaffordable rate, at which point the mortgage companies would point to the small print. We have found that they are, more often than not, unwilling to compromise.

    Having been recently communicating with the FSA and Office of Fair Trading, regulation of the industry is inevitable and we, along with must Sell and Rent Back Property Investors I have met, are welcoming it. We run credit, bankruptcy and CRB checks against anyone who wants to join the organisation as well as ensuring that the investor has sufficient capital backing should things go wrong (such as tenants defaulting, damages). We also offer separate long-term rental agreements (with compensation to the tenant should the SARB landlord breach the terms).
    Originally posted by RepossessionAngels
    you may be an exeption, but the number of websites selling qualified leads to contact distressed sellers would suggest my experience is not unusual.
    I am a Mortgage Adviser
    You should note that this site doesn't check my status as a Mortgage Adviser, so you need to take my word for it.


    This signature is here as I follow MSE's Mortgage Adviser code of conduct. Any posts on here are for information and discussion purposes only and shouldn't be seen as financial advice.



  • payless
    RA..
    The company I represent, ...., is keen to build long-term relationships with its clients and we would not be doing ourselves any favours if we didnt explore all the options available to our clients before proceeding with a sell and rent back transaction.

    The main options that are usually explored include re-mortgaging; swapping from repayment to interest only; a payment holiday; extension of the term; an estate/auction agent sale; help from friends/family.
    can't see these mentioned on your website
    Any posts on here are for information and discussion purposes only and shouldn't be seen as (financial) advice.
  • dunstonh
    With the FSA looking at introducing a minimum of 50k in the bank (and having assets exceeding liabilities) for firms directly regulated by them, I wonder how many of these companies could afford that?
    I am a Financial Adviser. Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
  • RepossessionAngels
    can't see these mentioned on your website
    Originally posted by payless

    Very true, but if you would like me forward a copy of the literature we give to each person that expresses an interest in our service - I would be more than happy to do so...
  • RepossessionAngels
    you may be an exeption, but the number of websites selling qualified leads to contact distressed sellers would suggest my experience is not unusual.
    Originally posted by toonfish

    I agree, the barriers to entry into the sell and rent back industry are very low - which is why certain parameters need to be set with the rent-back tenants' interest being central, whilst also thinking of the landlords risks.
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