Don't believe the media hype. How Sale and Rent Back is saving thousands of families from repossession. So why are the national charities so dead against it?
[UKPRwire, Sat Nov 17 2007] Sale and rent back has hit the headlines in the media recently, mainly due to the concerns regarding security of tenure for people who turn to private property investors when they need to sell their house quickly. Usually to raise capital quickly, or even to prevent repossession.
ITV's The Tonight Programme, Watchdog, and Panorama are just a few of the current affairs programmes to feature the doom and gloom of the rapidly growing sale and rent back industry. With the backing of large national charities such as Shelter and Citizens Advice, the 'Beware sale and rent back firms' campaign continues to roll on.
These programmes have concentrated on a small number of instances where people have lost their home after selling to one of these types of companies. The main problem highlighted by the media is that this industry is unregulated, unlike similar Equity Release schemes (known as home reversion or lifetime mortgage schemes), which are now governed by the Financial Services Authority (FSA). The message: people are putting themselves at risk, by selling, usually at a discount, their home to an unregulated quick sale company.
The FSA have indicated that it does not consider these activities to fall within their remit, as the transaction is considered a property transaction. However, Citizens Advice and Shelter are lobbying the government in an attempt to force FSA regulation of these activities.
Over the last 2 years there has been a massive increase in the number of firms operating within this industry, most of them are ethical, trustworthy property investors providing an 'alternative solution' for people who find themselves needing to sell their home quickly. The sale and rent back aspect allows this to happen without having to move out, something which is usually very important, as they are having to sell out of necessity rather than choice.
The recent bad press has concerned many investors who operate within this industry, who now have called for a uniform code of ethics to be created and lodged with the DTI, with a view to setting up a overseeing regulatory body, to demonstrate that there is room for an ethical and trusted alternative to the equity release schemes.
The frustration from investors is that the press is ignoring the positives that surrounds this industry, and that is how this sale and rent back service is saving thousands of family homes across the country from repossession. Some investors have raised concerns about the advice provided by such charities as Citizens Advice (who rely on the support of unqualified volunteers) as they have spoken to homeowners who have been advised that allowing the mortgage company to repossess their home is a better solution than selling their home. In cases such as this, the home owner is rarely provided with the full facts of the consequences of repossession, which include adversely affecting their credit rating, potentially for as long as 12 years.
The security of tenure problem is hindered by the lenders who lend finance against these properties, usually through buy-to-let mortgages. The majority of lenders stipulate that they do not allow tenancies longer than 12 months to be granted, essentially to protect their security should they need to repossess the property from the investor.
One way round this from the investors point of view is to offer buy back options, which allow the homeowner the choice of buying their home back within a specified period of time. However due to the circumstances surrounding the initial reason for selling, usually debt problems, these options may never be taken up.
Due to the actions of a minority of companies within this industry, the entire industry has now been tarred with the same brush. However people who find themselves potentially having to sell their home, should consider sale and rent back as one of their options, as it could provide a viable solution to solving their problem. The majority of quick sale companies will provide an purchase offer, without obligation or upfront charges. The sale and rent back industry is there to provide homeowners with an additional alternative. Not for everyone, but a viable option.
Anyone considering sale and rent back of their home in Cheshire should contact Jeremy Vernon of property company RedSofa, for a no obligation property evaluation, on 0800 0436631 or by visiting http://www.redsofa.com
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