The credit crunch has had a significant effect on buy-to-let landlords over the past 12 months: the number of landlords accruing more than 3 months of arrears doubled in the second half of 2008, hitting an incredible 27000 – this figure was almost 4 times higher than the 7,500 landlords with more than 3 months’ arrears towards the end of 2007.

The Council of Mortgage Lenders has also disclosed that 4000 homes on buy-to-let mortgages were repossessed in 2008, compared to 2000 in 2007; an increase of 50%. Although these figures sound alarming, it is important to bear in mind that these repossession figures represent around 0.4% of all active buy-to-let mortgages – there are 1.15 million such mortgages within the UK. In fact, around half of the buy-to-let mortgages in 2008 were take out by soundly-established landlords who took advantage of competitive interest rates to remortgage their properties.

However, it is impossible to deny that the number of buy-to-let landlords with mortgage arrears has risen sharply, and this is due to several factors. Like many private homeowners, landlords have been adversely affected by the rise in unemployment and the slump in house prices – many have found it hard to find tenants for their properties in order to repay the mortgage, or tenants in properties may fail to pay their rent as a result of losing their jobs.

Also, due to the current economic climate, rents have been driven down and both a fall in rent and a loss of tenants will undoubtedly affect a landlord’s ability to pay the mortgage (make sure you rent your property for the maximum possible rent). This leads to properties being repossessed, in turn meaning many tenants are evicted. Properites are also taking much longer to rent in the current economic climate – 70 days on average – and this means no rental income for landlords for several weeks.

Unfortunately, when credit was easily available and property prices exceedingly high, many people with no adequate experience thought entering the property market on a buy-to-let mortgage was a failproof way to make money in the form of a long-term investment – it is these inexperienced landlords that are struggling now.

They cannot sustain an empty property or properties and, in the current climate, may struggle to sell these properties quickly enough. Evicting tenants who are not paying their rent also takes time, again meaning no rental income for the property – this leads to arrears and subsequent repossession for some inexperienced landlords.

If you have a buy-to-let mortgage and are struggling with repayments, do not ignore it – seek help right away. Contact your lender to explain the situation (before the first missed payment, if possible) and they will be much more likely to offer help. They may offer you a payment holiday until your finances are in better order, or they may allow you to make reduced payments for a set period.

If you have a repayment mortgage, consider saving money by transferring to an interest only mortgage (most landlords have these). If you can prove your cashflow problems are only temporary, your lender is much more likely to agree to an amicable solution.

If you feel too nervous about approaching your lender yourself, seek the help of specialist debt agencies such as the Citizens’ Advice Bureau or the Credit Consumer Counselling Service (CCCS) – they can provide you with free invaluable advice and liase with your lender on your behalf, in order to try and reach a solution to your problem.

If you are coming to the end of your mortgage deal, you may be able to save money by taking advantage of the current extremely low base rate through remortgaging; even if your credit history prevents you from doing so, you may be able to save money by simply switching from a fixed rate to your lender’s SVR, taking into account the low interest rates at present.

Ellie Irwin of the National Landlords Association says;

“Undoubtedly, these are challenging times for landlords. However, professional landlords are better equipped to deal with rental arrears than smaller, ‘buy-to-let’ landlords.

Ensuring a property is competitively priced, marketing a property before tenants leave to avoid a void period, and keeping in regular contact with their tenants are all ways in which a landlord can avoid falling victim to the recession.”

Experienced landlords always have a contingency fund to cover lean periods, and this is a very sensible thing to have; when you do have tenants and are yielding good rent, save some of this in order to cope when your property is unlet or to pay for essential maintenance works.

It is natural when times are hard to look for ways to save money, but do not pennypinch in the wrong areas: for example, a letting agent may cost money but can help you find a tenant quickly in the event if your property being vacant and they also oversee the tenancy of your property. If you were to get rid of this service, you would be responsible for all this, adding more stress to an already stressful situation.

The Government has introduced a number of measures to help homeowners during the recession, yet these do not apply to those with buy-to-let mortgages (for example, the State Mortgage Rescue Scheme does not apply to second homes). Thus, the Government really needs to do more to help protect landlords from repossession.

In the meantime, if you get into trouble with your buy-to-let mortgage remember to contact a free debt advice charity and your lender as soon as possible.

Original article by Sharlene Goff at FT.com – Updated and additions by HouseRepossession.co.uk

Investors who are partly to blame for the state in borrowing, are up in arms that the current buy-to-let mortgage products offer poor interest rates when compared to the base rate and in fact other mortgage products.

We are aware that the drop in property prices has tempted the keen investors back into the market with low prices, good rental prospects showing a keen yield.

Estate agents have reported a substantial increase in inquiries this month. Cluttons, the London-based agent, for example, said it had the busiest January in five years by number of inquiries.

Yet the enquiries are hard to find banks to back them. With only the cash rich, those who can cover a 40% down payment on a property able to lap up the cheap prices. Which in our mind is a good thing, it prevents the market over heating again and if you are in a position to invest in buy-to-let then you should be doing this from a cash rich position, not mortgaged to the hilt.

The average two-year fixed rate on a buy-to-let mortgage has remained at approximately  6.3 % for the past 12 months, according to Moneyfacts.co.uk. During this time the base rate has fallen from 5.5 % to 1.5 %.

The difference between buy-to-let and base rates is because falling property prices have prompted lenders to pull away from buy-to-let, which they view as a greater risk than standard residential business.

The number of buy-to-let mortgage deals on offer has fallen more than 90 per cent in the past 18 months, and the banks that are still lending are demanding larger deposits and higher rental payments.

The lack of finance is proving a big obstacle for buyers waiting to re-enter the property market.

“We have received a lot of calls so far this year from clients who think this is the moment to buy,” said Lindsay Cuthill, a director at Savills “But the hoops through which they have to jump to secure finance are dissuading some from getting involved.”

Most buyers need a 20% deposit to even have a chance of finding a buy-to-let deal and this will be at the high end of the interest rate curve, think closer to 40% LTV to get a good deal. Landlords with a deposit of 20 % have only 15 deals to choose from. The Post Office became the last lender to withdraw its 85% loan-to-value deals this week.

We understand that a year ago there were more than 1,000 buy-to-let deals available for landlords with a deposit of 15 % or less, now there are none. Quite incredible and a true reflection of the banks showing prudence and an aim to build up their loan books with quality mortgages.

The smart investors are finding the cash to buy cheap repossessed properties or simply a good deal when they see one. They will wait for the sharp rise in property prices as LTV’s are relaxed and then leverage against this capital growth in the future. Some deals are too good for the investors to pass on.

James Mannix, head of residential investment at Knight Frank, said banks were only willing to provide funding to professional investors if the properties had yields of 8-10 %, and even then they only wanted to lend 50-70 % of the property value. This is similar to the commercial property market where LTV’s are at around 60% maximum and only on properties with long terms rental income (10 years +) to strong covenants.

Many landlords would now struggle to secure a high enough rental yield to cover their mortgage payments. Lenders have introduced tougher criteria on how much rent is required and, while capital values have dropped, rents also fell towards the end of last year.

What property yields can you find? Any buy-to let bargains out there offering 10% or more return? Let us know below….

The idea is that a company buys your property, which you then rent back from them long term. You don’t have to lose your home when you get in trouble with your mortgage. In principle, a sound idea, or is it?

Before the economic slow-down sell and rent back schemes were relatively low key, not particularly common in a healthy, strong property market. But since the property market started to collapse, sell and rent back providers have been finding fertile ground.

Sell and rent back schemes started to raise concerns back in October ‘07 when the Citizen’s Advice Bureau (CAB) flagged what appeared to be a growing problem. So much so that the schemes were labelled a disaster waiting to happen. Sell and rent back companies were increasingly paying less than 60% of the value of homeowners’ properties. And, taking advantage of consumers who were too distressed to think straight, some were giving nothing more than a standard six to twelve month tenancy in return.

Since Northern Rock first kicked the UK economy into a downward slide the number of companies offering sell and rent back has rocketed. Just do a Google search and you’ll see the evidence. Some are large firms who offer decent guarantees, others are small outfits searching for bargains and distress buys. But whatever size they are, most operators don’t offer a long term rental guarantee. Far from it. In fact many former homeowners have found themselves evicted once their Shorthold Tenancy Agreement expires.

The charity Shelter and the Council of Mortgage Lenders added their voices to the CAB’s concerns and the Office of Fair Trading (OFT) launched an investigation in response. John Fingleton, the OFT’s Chief Executive, explained, “Our research shows that sell and rent back deals have potential to cause serious and permanent harm to often vulnerable homeowners. The unfamiliar and highly pressurised situations that these people find themselves in may leave them particularly vulnerable to misleading statements or valuations from sale and rent back firms looking to make a deal.”

Unlike many financial service suppliers, sell and rent back schemes are not regulated by the Financial Services Authority (FSA). So consumers have little protection against unscrupulous suppliers. Citizens Advice is currently calling for new official regulation covering sell and rent back firms, before the problem gets a lot worse.

In October this year (2008) David Harker, Chief Executive at  CAB, said “While sale and rent back agreements might be the right thing for some people, consumers need the sort of robust and binding safeguards that only statutory regulation is likely to provide. With more people seeking advice about mortgage arrears we are concerned that these safeguards should be put in place as soon as possible.”

In the meantime? Unless you’re determined to sell and rent back – or you have a rock solid deal in writing, checked by a solicitor – don’t. There are better ways to solve your financial problems without resorting to an unregulated product that currently has a very bad reputation.

Things to consider if sell and rent back is what you want:

• Many providers offer 75-90% of your home’s market value but end up offering a lot less. Stick to your guns.
• Get full and complete tenancy details in writing and have them checked by a solicitor so that you know you are legally entitled to live there for the long term.
• Make sure your rent is agreed in the long term. Some sell and rent back providers have put rents up so much that tenants have been forced to move.
• Ensure that you have clear advice and evidence about what happens to your tenancy if your new landlord goes bust
• Don’t panic and rush into it. Your mortgage lender should be open to negotiation and they’re under instruction from the government to be flexible about mortgage arrears. Try all other avenues first.
• Take advice from an expert: visit your local Citizens Advice Bureau.

It would be great to hear from anyone who has been involved with sell and rent back schemes.

A quick online search will return a whole load of companies offering to buy your house for cash. By filling in a simple online form, they promise you a free valuation and cash offer on your home within twenty-four or forty-eight hours. As little as two weeks later, your home will be sold and shortly afterwards the cash will be in your hands. So, cash for homes offers can seem very attractive.

At a glance, cash for homes looks like the ideal solution. You avoid the delays you always get with a traditional estate agency. You get rid of all the problems that normal buyers bring; changing their minds, dropping out and gazumping each other. The process, from your side, is very simple. And it’s fast, at a time when you’re probably feeling fairly desperate for a solution.

But is it too good to be true? As you’d expect there are positive and negative points.

Who offers cash for houses?

Most professional buyers offering this type of deal claim to be well connected within the property industry. They have cash buyers ready and waiting, urgently looking for properties just like yours. You don’t pay a thing when selling your home for cash. And there are no estate agency or any other fees, which is another big advantage when you’re on the brink of repossession.

At the end of the day the buyers are looking to make a profit and so they should if they are to purchase a house or flat usually with no building surveys completed and they pay in cash, on time without pulling out of the deal. But what discount is this worth to the vendor? That is what you need to weigh up.

Cash for homes – what’s in it for the buyer?

Professional property buyers either purchase the property themselves or make their money by charging your buyer a finder’s fee for your property when arranging cash for homes.

Not only that. The biggest financial advantage to the cash for homes company is that they’ll only offer you a percentage of your home’s fair market value. Sometimes they’ll offer as little as 45% of the market value, sometimes as much as 85% but rarely more.

So although you benefit from a more or less immediate sale with no hassle, you face losing an enormous amount of profit. Unless you have a tiny mortgage and a massive amount of positive equity in your home, you are bound to lose.

Liaison with your lender

A professional buying company will take on all communications with your lender. While this is good because it reduces your stress levels and gives you time to breathe, it also takes all control completely out of your hands, leaving you with no say.
Cash for homes – the benefits and disadvantages

No Home Information Plan (HIP) required

When you sell your property via a cash for homes provider, you avoid having to pay for an Home Information Pack. But the saving comes nowhere near the loss of profit you suffer because of selling way under the market value. The only real benefit of a HIP-free sale is that you save time and a bit of hassle.

Total confidentiality

Some people are embarrassed about being repossessed, preferring to keep it quiet. Cash for homes companies always promise a confidential sale, but confidentiality comes at a high price.

Fast completion

Most suppliers offering to buy your home for cash promise amazingly fast completion, usually within 28 days or to a date that suits you.

Cash for homes – How does it work?

•    You request a free survey. Always confirm that there’s no obligation to go ahead.

•    A company representative will come to your home, when it is convenient for you, and undertake a valuation survey. Always ask to see your survey in writing and make sure it has been completed by a Royal Institute of Chartered Surveyors (RICS) qualified valuer. If it is not undertaken by a RICS qualified valuer then it is simply someone’s opinion of value and the report can not be called a valuation report. Also ask to see what comparable and recent sales evidence the report uses to calculate the value of your own home. Make sure that this is a qualified valuation indicating fair open market value and not the cash for homes companies’ idea of value.

•    Visit the Royal Institute of Chartered Surveyors RICS.org and see a good explanation on how to value your own house in this post here.

•    The company will then contact you to make an offer. Get this in writing and check all the small print before you decide. It is very important that you do check the small print and if you are considering taking the offer we strongly suggest that you employee a solicitor to read through the contract and highlight any important sections. You should be able to find a good high street solicitor which might be an hour or two work for them but well worth doing.

•    The cash for homes provider only offers the trade value, not the market value. This can be anywhere between a worst case 45% and best case 85%. Think of it as a wholesale or fire sale value.

•    If you accept this trade offer, the cash for homes supplier guarantees to sell your home following the contract you have signed or at this point it might be on a spec basis.

•    The company will discuss and agree timescales with you, then they’ll attempt to find a buyer for your home.

•    The potential buyer gets in touch with you to arrange a viewing and/or a survey, which they pay for.

•    You agree the sale or negotiate until you reach agreement.

•    You choose a completion date.

•    If you decide to go ahead, the solicitors will exchange contracts, making them contractually obliged to buy your house.

•    Completion will happen and soon afterwards you’ll get the cash for your house in your hand.
Cash for homes providers include:

•    The smarter choice: thesmarterchoice.co.uk
•    UKPB: ukpb.co.uk
•    National Home Buyers: nationalhomebuyers.co.uk
•    I Buy Homes: ibuyhomes.co.uk
•    Cash For Homes UK: cash4homesuk.com

Please read our disclaimer on the front page of this website. We do not endorse any of these companies above and suggest you take legal advice and make sure you understand exactly what they offer. Search the internet and look in papers for the best cash for homes deals, as there’s an enormous variety available.

Have you used the companies list above or other companies like them? Please comment below outlining your experiences.

You can avoid repossession by making a quick sale and if you sell for a figure that enables you to pay off the arrears you owe from the profit, then you are debt free. This can be one of the best ways to avoid repossession, because it leaves your credit record relatively intact. You’ll then be free to buy again when you’re in a position to.

Sell quickly but be cautious

Whatever you are selling, the need for a quick sale immediately puts you in a vulnerable position. You leave yourself open to fraudsters, and to people trying to turn a fast profit or get your home for a rock bottom price. So be careful about who you do business with, no matter how tight things get. Everyone has heard about people who have accepted, in desperation, offers less than half of their property’s value just for a quick sale.

Valuation – Understand what your home is worth

Your house or flat is only worth what someone is willing to pay for it. The market definition used by the Royal Institute of Chartered Surveyors (RICS) which all property valuers are a member of quote the definition of market value as:

The estimated amount for which a property should exchange:
- on the date of valuation (or sale)
- between a willing buyer and willing seller
- in an arms length transaction
- after proper marketing (note this would not include sale by owner or limited marketing due to a quick sale)
- when both parties had each acted knowledgeably, prudently and without compulsion (it could be argued that a quick sale is “compulsion”)

Remembering that you are looking for a quick sale and therefore a discount will usually be required as you have broken two of the rules above, (a) proper marketing and (b) without compulsion.

Value your own house with accuracy

Make sure you understand the RICS definition, it is tried and true. You can value your house just as well as any other valuer or real estate expert. Its quite simple, you just need ‘comparable sales’. Sales of houses or flats that are comparable to yours which have sold within the last 1 or 2 months. These will give you a perfect idea of what your place would actually sell for given the points above.

For example, if you own a 3 bedroom house with a separate lounge, kitchen and one bathroom then look for houses that have sold exactly like that. You are trying to compare apples with apples. The best method is to ask local real estate agents for a list of ‘comparable sales evidence’ that they know of, you may have to hound them for these details but trust us, they have the details, so beg if you need to! Ask the agents for a PDF of the property to be emailed over, or check their websites and ask them what it sold for. If they don’t want to tell you, ask; was it over £200,000? Was it less than £230,000… so it was £220,000 then was it? This method works… you will get a ballpark figure. Keep humor in the game.

Once you have say 10 of these comparable sales details of houses in and around your area similar to your place then need to see where your house fits into the puzzle. Ask yourself, is my place better than this one and worse than this one? This one has an extra bathroom but its on a main road. This one is really big but has a small backyard etc etc until you are happy that you know where your house fits and therefore what it is worth on the open market.

Price per square foot net internal area?  (Per sq ft NIA)

Professional builders, valuers and estate agents (well the good ones) will be able to talk to you in terms of capital value per sq ft NIA (per square foot net internal area)

Take another look at your 10 comparable sales and if they have floor areas written up work out how much the properties sold for per sq ft NIA. That means a 1,000 sq ft NIA house which sells for £250,000 is worth £250 per sq ft NIA capital value.

Sale Price /  Sq Ft NIA = Capital Value Per Sq Ft NIA.

What is the average sale price per sq ft NIA of your 10 comparable sales? Maybe £250 per sq ft NIA?

Now measure your own house up with a tape measure, internal wall to internal wall making sure you include hallways. Its easier to measure in square meters first so for example a room measuring 5.28m x 3.84m = 20.28 sq m. Then convert the sq m to sq ft, by multiplying 20.28 x 10.764 = 218.29 sq ft NIA. Add up all your rooms to arrive at a total.

So you have calculated that your house measures 800 sq ft NIA, therefore if the average house like yours, in the same area sold for £250 per sq ft NIA then yours should be worth approximately £200,000.   (800 sq ft x £250 per sq ft NIA = £200,000)

This is an excellent sanity check to see if you have valued your house correctly. Does it fit in with the other 10 comparable sales? If so then you can be quite confident that your house is worth approximately £200,000 if marketed correctly on the open market.

Remember that cellars and garages are sometimes included in sq ft area figures of sale particulars and maybe this area is worth 50% of the total capital value per sq ft… or less as they are cheaper to build.  Also note that brand new houses will be worth more per sq ft NIA than one that is dilapidated.

So now you should have a good idea what your house is worth in today’s market and given that you need to sell fast a good rule of thumb is to deduct at least 10% if not 20% off this value. Think about using 20% off as a base level. So given this example your house should be worth at least £160,000 (£200,000 less 20%.)

If this value would cover your mortgage and debts then you should consider contacting quick sale companies to see what they would offer you or if your real estate agent could sell it for this amount or more straight away. Otherwise, you will invariably end up receiving less money through repossession after bank fees and the fact it’s sold at auction.  Plus you will have black marks against your credit history.

How to sell your home fast

Ask yourself these four simple questions:

• How will I sell my house?
• Who can best help me make the quick sale I need?
• How long will it take to sell?
• Will I get enough profit to get me out of trouble if I sell my house quickly?

Who are the best people to help me?

You can sell your house through an estate agent, online, or both. You can sell your home yourself, avoiding estate agency charges and keeping tight control. Or you can take the plunge and handle the whole process, including conveyancing, yourself for a quick sale. However, please note all that has been mentioned in this article as selling your home yourself is not for the fait hearted.

How long will it take to sell?

To a certain extent, this is up to you. It depends on the choices you make. There are a few key things to think about.

Be realistic about your quick sale selling price

Following the self valuation example above you should have a good idea of what your house is worth on the open market and less 20% if offered as a quick sale / fire sale. There’s no point trying to get more than your home is worth, unless you have all the time in the world to wait for the person willing to pay your price. If you want a quick house sale, set a realistic price based on the average figure calculated from at least three estate agent estimates. Make sure these estimates are based on a sale within a certain time period… not asking prices! Ask them to back their prices up with comparable sales evidence then check all this against what you think it is worth.

Avoid panic decisions by deciding beforehand the lowest price you’re prepared to go to, and don’t budge from it. The whole point of a fast property sale is to make the money you need quickly.

Visit dspropertyconsultants.co.uk for a variety of useful information, note their very low fast sale price versus value… as low as 60%. This is simply an example of what is out there and we do not endorse this website. In fact be very careful at these percentages… Your local rich plumber would pay you more! Go and ask him!

Hints and tips for making a quick sale

Aim for perfection with DIY!

A quick sale can depend on how good your home looks. It doesn’t always cost a lot to fix things yourself and a lick of paint makes a huge difference. It just takes time and effort and it is very worthwhile. Make repairs and clean up tatty areas like scuffed skirting boards and stained kitchen surfaces.  It is remarkable what a difference simple things like this make to the selling price. And because most people prefer to buy somewhere they can move into straight away than a fixer-upper, you’re much more likely to sell fast. Make the very best of your interior and garden. Painting is proven to be the cheapest method of increasing your houses value.

Make the most of your home and garden and net a quick sale

You’ve probably seen the TV programmes. So you’ll understand how important it is to make the most of your home and garden if you want a quick sale. Just like DIY, a clear, attractive interior and an attractive, functioning garden can make thousands of pounds’ difference to your asking price. And, if someone falls in love with your home, it can result in a super-fast sale.

Apply common sense and de-clutter it!

Hide or throw away your clutter, throw open the windows for fresh air and keep everything squeaky clean and fresh. If you have a spare room full of clutter, turn it into a spare bedroom so people can see how it’d look without having to use their imaginations! Then mow the lawn, weed your gardenbeds and trim back the wilderness. Perhaps one of your family or a friend loves gardening? If so, ask them to help you out.

There’s plenty of great advice online. Try housedoctor.co.uk, the official UK website of Channel 5’s Anne Maurice, presenter of ‘House Doctor’. Or visit the Channel 4 website: Click Here.

Will I get enough profit if I sell quickly?

This is something to calculate carefully before you start. If you’re unlikely to get the profit you need from a quick sale, it might be better to take another option. But if you can get your property into top condition, looking its best, and the average estimated asking price matches your own valuation then selling quickly can be a very effective way out.

Add your thoughts on a quick house sale…

Sell and rent back – everything handled by one company
Both the purchase and rental back to you are handled by the same company, so the process is kept very simple. Most sell to rent back companies promise to keep you informed at every stage, which has to be a good thing. And the process is completely discreet with no estate agents’ boards. While the details can vary from provider to provider, these steps are standard:

Step 1 Initial valuation

A sell and rent back valuation consultant will visit you at home. He or she will explain the ins and outs of the process, answer your questions and value your property. The valuation will be calculated based on comparisons with similar properties in your local area. The offer, when it is made, comes without obligation so unless you are completely happy with the offer and everything it involves, you can still say no.

Step 2 A free independent Valuation & Survey

Once you’ve agreed terms for selling and renting back with the sell and rent back company’s valuation consultant, you appoint a solicitor. The company will arrange and pay for an independent valuation and survey, and they’ll also pay for your solicitor.
The company have an independent valuation carried out to check that their valuation is accurate and on track. The independent valuation should be carried out by a RICS member (Royal Institute of Chartered Surveyors): rics.org

Step 3 Sell to rent back paperwork

As soon as everyone’s in agreement and ready to go, and all surveys are in and satisfactory, the company will instruct their solicitors to buy your property. At this stage, you’ll need to provide any documentation needed to smooth the process. It is your solicitor’s job to explain what paperwork’s required.

Step 4 Completing the contract of sale

Once all the paperwork has been gathered and signed by everyone involved, the contract is completed. Legally, this is just the same as completion on a private sale.

Step 5 The profits are paid to you

After subtracting your outstanding mortgage and any other money owed on your home, your solicitor will release a percentage of the remaining the funds – the profit – to you. With sell and rent back schemes the sale is usually completed within twenty eight days and you should be kept in the picture throughout the process.

Step 6 – Assured Shorthold Tenancy

Your sell and rent back company provides you with an assured shorthold tenancy contact, or agreement, which gives you the legal right to stay in your home and rent it, usually for at least a decade.

HomeOwnersAdviceCentre.co.uk great site on “Sell and Rent back”.

Several buy-to-let clubs are striking sale-and-rent-back deals with desperate homeowners, encouraging members to profit from rising repossessions.

Investors Chronicle publishes an investigation today showing there are more than 20 groups in the UK using free seminars to promote the practice.

The method is being used despite assurances from the government that the Financial Services Authority will regulate the sale-and-rent-back sector.

07/11/08 Financial Times

HomeMove.co.uk – The UK’s independent property help portal.

Do you need to sell your home, but don’t want to move?

A relatively new player in the home repossession market is ‘sell and rent back’. This product lets people at risk of repossession sell their property then rent it back from the new corporate owner, meaning they don’t have to move out. The kids can stay at their current school, you keep your community and remain close to your friends. So sell and rent back can be the answer for some householders.

No costs, chains or stress. It couldn’t be easier. Or could it?

Sell and rent back is being heavily marketed at the moment as a great solution to repossession problems. Even though you sell your home and give up all claim to ownership, you can stay there so family disruption is minimised. Selling to rent back isn’t for everyone but, depending on your individual circumstances, it can help ease your situation.

Avoiding all the usual fees and charges

Sell and rent back lets you release the equity held in your home. In doing so you avoid all the usual costs and fees, as the deal includes all the charges involved in buying your home and renting it back to you. So you save thousands of pounds on estate agents’ fees, HIP costs and survey charges. And even though you don’t have to pay legal fees on sell and rent back deals, you still have your own solicitor to represent you.

You get a long renewable lease

Many cash for houses providers grant a ten year renewable lease, or assured shorthold tenancy, the UK’s standard private lettings lease. Under your lease, you’ll be allowed to rent your home back for at least a decade if you wish to, sometimes longer if you negotiate.

Get 100% market value for your house

Selling to rent back can give you the full 100% market value… very rarely. Many arrangements give you at least 30% less than your home’s market value. Most providers pay out an initial lump sum, usually about 70% of the agreed sum, on completion of the sale. The remaining 30% is given back to you when you tenancy ends.

Sell and rent back to become a tenant in your old home

On completion the company will grant you a 10 year ‘assured shorthold tenancy’.

Find out more about Assured Shorthold Tenancy agreements at:  Communities.gov.uk/housing