Sell and Rent Back, Does this make sense
At first sight, this makes no sense! Why would an owner go through the effort to find a suitable buyer and then sell and rent back the property? It almost seems a contradiction, but there is some degree of logic involved here. Given that there may be circumstances beyond the control of the original owner, a sell and rent back agreement may be the prudent route.
A sell and rent back agreement makes sense if the owner is ready to file for bankruptcy and needs the funds to pay off some of the debt load. This is more common today than ever before with two forces in place: first the predominance of pre-approved offers for plastic buying power with high credit limits and, second, the changing and more insecure employment atmosphere. These are the two most common reasons to sell and rent back. There are, however, other situations that would lend credence to a sell and rent back agreement.
Consider the owner who is custom-building another home and needs the security of the guaranteed sale of the present home in order to finance the home that is being built. It would make sense to stay put until the new house is ready to be occupied. This sure beats the need to move twice, placing most of your belongings in storage and spending a few weeks or months in temporary accommodations such as a hotel suite. A sell and rent back agreement reduces emotional and professional stress.
A sell and rent back agreement is a creative way to loosen funds needed to cope with an expensive and unforeseen situation, most often involving medical or educational debt. Of course, in most cases you would need to transact this arrangement with a seller who pays cash for houses.
Most buyers would like to move into the house they have just purchased. This is not the case with the cash for your house buyers. They are usually most interested in building their real estate empire. Therefore, they are usually open to this arrangement.
In addition, some sell and rent back agreements carry a buy back which acts like the buyer's insurance policy because it guarantees a future buyer for the property as well as rental income for the present. This is a win-win situation for both parties to this transaction.
It also relieves the seller from uprooting and relocating children, which can be a double trauma for the child. Depending upon their ages, they have playmates and schoolmates. It is difficult for them to leave an established comfort zone and start all over again in a strange, new place.
A sell and rent back agreement is also prudent when a divorce is part of the equation. The spouse with custody may not intend to move as this would cause a second stressor for the children. The divorce is already hard enough for everyone concerned. Therefore, a sell and rent back agreement is a viable option when relocating is out of the question.
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