Selling and renting back

FlorayG

An acquaintance of mine ( friend of a friend) is in dire financial straits and is planning to sell her mortgaged flat to someone she barely knows with the promise that she can remain living in it and rent it.

Obviously she loses her 'security' but I gather she's running very close to risk of repossession anyway.

I'm just curious as to how this works. Is it sold with vacant possession if she never moves out? I know a property with tenant in situ sells for less, but she's not a tenant until it's sold.

Any particular dangers or perhaps advantages of doing this?

RAS

This whole process is regulated by the FCA to such an extent that few companies operate. The FCA has found major problems with these schemes?

CAB has a link to the list of FCA regulated companies. If she's considering a company not listed she can expect major problems. And there are other issues including the possibility that she can't claim rental support through UC.

Their page on sale and rent back also has links to advice on alternative ways of managing the problem. Your friend should talk to CAB.

If she can't bring the arrears up to date, she also needs to talk to her mortgage provider. Even if they are really close to repossession they might agreed to her selling the property and going into other rental.

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/6675375/selling-and-renting-back

It's sold without vacant possession, the whole deal is structured for someone buying it with the tenants in situ who wants to be their landlord.

Previously this was unregulated and generally it was the same bunch of cowboys as the we'll buy your home for cash in 7 days lot. They had similar tricks too, give a low price that was just about acceptable to someone thats desperate and at the 11th hour cut it with a take it or leave it attitude. With the rent back option you would add in a fairly unfair tenancy agreement and expect massive rent escalations each year as generally they want you out to sell the property.

Now its regulated I suspect things have improved somewhat but I also suspect there are far fewer people operating in the space as its no longer the cash cow that it once was.

MEM62

An acquaintance of mine ( friend of a friend) is in dire financial straits and is planning to sell her mortgaged flat to someone she barely knows with the promise that she can remain living in it and rent it.

Seriously bad idea.

 I gather she's running very close to risk of repossession anyway.

Then her way forward is to get some proper advice on dealing with her financial situation rather than making decisions out of desperation. (If she cannot afford her mortgage then how is she going to afford rent?)

user1977

How did she find the "someone she barely knows"? Is this a private individual or a business? What other solutions has she investigated?

The main downsides are that the price is likely to be aimed at the desperate/gullible, and she might be kicked out of her tenancy as soon as the landlord can do so in order that they can flog off the property for a profit.

TroubledTarts

For your friend

Please be careful, individuals and companies prey on people in your situation.

Unless you have had a friend that you trust recommend such an individual or company please proceed with absolute caution if at all.

It may well be worth using the debt parts of this forum to see if you can get some advice and help there before doing something you don't need to do.

Albermarle

to someone she barely knows 

Is this definitely an individual, and not one of the type of companies mentioned above ?

elsien

They will find a reason at the last minute to lower the price they offer her thus potentially leaving her in negative equity. And without security.
Neither of which are great options

user1977

 thus potentially leaving her in negative equity.

The transaction won't happen if she can't at least redeem her mortgage.

SarahB16

That sounds like a very bad idea.

I think she needs to speak to her mortgage provider (seeking a mortgage holiday or extending her mortgage term by a few extra years) after getting some proper financial advice. Also could she rent a room out in her flat too (taking advantage of rent a room relief).

FlorayG

I don't want advice, thank you, it's nothing to do with me and she isn't a friend. I'm just curious how it works.

As far as I am aware, she's planning to sell to a person not a company