Sale-And-Rent-Back Scheme

Reposession

Thousands of landlords are attempting to break into the sale-and-rent-back (Sarb) market as growing number of people face repossession.

Many say it’s a sport that preys on the weak. The game is simple: a homeowner gets on the property ladder with the help of a less than perfect mortgage package. The fixed term comes to an end; remortgaging won’t help because the latest rates are pathetic. Low and behold, the borrower slips behind on payments and lapses into a state of arrears. The lender quickly gets on the blower and says, “This ain’t working, you should sell and give us our money back”. And that’s when the concept for Sale-and-rent back becomes a reality…

What is a Sale-and-Rent-Back Scheme?

It’s when a homeowner sells their property to a landlord with the agreed condition that they can stay on as tenants.

Typically, the homeowner will receive 70-85 per cent of the property value, with no real guarantee they can stay long-term (unless stipulated in a contract somewhere, but that’s not always the case). But in many cases the alternative would be repossession.

Advantages of the scheme for landlords

As mentioned, they get to buy a discount property, some times which equates to a 30% reduction. On top of that, they acquire tenants that want to stay long-term and will treat the place like a home.

Advantages of the scheme for the seller

The seller can clear debts, stay in the family home, keep their kids in the same school, and no one will ever need to know what happened- apparently “image” is a big deal…

The critics rant

The critics? Of course. You didn’t expect a scheme like this to go under the radar of the hippies, did you?

The hippies find it immoral that landlords are able to buy property at discount because the seller is desperate to avoid repossession- apparently it’s taking advantage of others misfortunes. There have also been cases where landlords provided very limited tenure tenancy and after a short while the tenant is kicked out or the rent increased.

I don’t understand the critics cries

Hmm…i’m struggling to wrap my head around the problem. Perhaps I’m just a beastly parasite that has no remorse or compassion? Or perhaps I’m just unable to see the problem with companies/people offering solutions to problems.

If the homeowners don’t sell, the likelihood is that they will face repossession. If the homeowners try to sell through an agent in an attempt to reach the best possible sale price, they may have to wait months before someone bites in the current dry market- furthering their debt problem. Additionally, both scenarios means that the vendor will need to find a new place to live when they don’t necessarily want to.

So am I stupid to think that the alternative solutions, as mentioned above, are far worse than the offer on the table?

Ultimately, the Sale-and-Rent-Back Scheme is just an option; no one is forced to do anything. Previously I had a rant about the ridiculousness of mortgage lenders being blamed for borrowers getting into debt. Surely, we, as individuals, should take responsibility for our own actions? Same principle in this case- there is no gun to the head involved. If someone is too incompetent to make sure that all the adequate conditions are in place (e.g. guaranteed long-term tenancy without rent increase), then surely our personal stupidity is our own weakness, and not the actual offer?

Do these companies/people prey on the weak? Not in my opinion. They offer an optional solution which isn’t perfect for the struggling homeowner- but when you’re in the shit, you don’t expect to jump out onto a field of gold, do you? If only life was one long episode of Neighbours.

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