Can I sell my house and rent it back?

There are many different reasons why you may wish to sell your home – and one of them, surprisingly, is so you can rent it back straight away.

The main reason someone would choose this route is to save money. Paying rent on a house is cheaper (in the short-term) than paying a mortgage – and therefore, if you are in financial difficulty, this option could give you a lifeline.

Below, we have outlined how you can sell your home and rent it back – including the pros and cons of doing so, via a sale and rent back scheme.

What is the sale and rent back

A sale and rent back scheme is when you sell your property to a private firm, typically for below its market value, in exchange for being allowed to stay on as a tenant for a fixed term.

This type of scheme tends to be used by homeowners who are experiencing financial difficulty and require a sale in order to pay off debt. Selling the property is a good alternative to repossession as it gives homeowners more control in who they sell to and the amount they receive. 

The advantages of the sale and rent back scheme

Sale and rent back firms are required to follow strict rules – many of which give you protection. For example, when you first enter negotiations about a sale and rent back scheme, they must give you at least 14 days ‘cooling off’ period to consider. This rule guarantees that you will not be rushed into a decision, without having the opportunity to seek independent advice first.

The company you deal with is also required to offer you a fixed term tenancy of at least five years. This is advantageous because it provides you with stability, in knowing the period of time you will be able to rent your property, and when you will have to move out.

You can also save money, in the short-term, on the maintenance costs of owning a property. These costs are no longer your problem once you sell it.

Finally, because sale and rent back schemes are regulated by the Financial Conduct Authority (FCA), there is a complaints procedure you can go through if things go wrong. This means that you will not be entirely alone – there is an independent body supporting you.

The disadvantages of a sale and rent back scheme

Although the sale and rent back scheme can be beneficial in the short-term, it’s not likely to be advantageous in the long term. This is because a private firm will offer to buy your house for less than its market value. Furthermore, if the price you are being offered is less than what you owe on your mortgage, the mortgage lender can refuse to let you sell it at that price.

It’s important to be aware that, in some cases, you may lose some benefits when you opt for a sale and rent back scheme. The benefits that may be affected include:

• Housing Benefit
• Jobseeker’s Allowance
• Employment and Support Allowance

Another issue to consider is that, although you will often be offered a sale and rent back scheme on a fixed term, the rent you pay may increase once that fixed term expires. Therefore, with this factor out of your control, sale and rent back may not be a secure, long-term financial option.

Rules that sale and rent back companies must follow

The Financial Conduct Authority has created several rules that any sale and rent back private company must comply with. These include:

• No direct marketing – for example, promotional leaflets being dropped through the doors of potential clients
• Affordability checks to make sure that a potential client can afford the proposed rent
• Determining if completion of the transaction will affect any entitlement to benefits
• A fixed term tenancy which must last at least 5 years
• An independent valuation of the property 
• The introduction of a cooling-off period of 14 days to enable more time to decide if the offer is suitable

If the sale and rent back firm that you deal with does not follow any of these rules, then you should report them to the Financial Conduct Authority, and not sell your house to them.

What should I look for in a sale and rent back

There are a few key factors you should make sure of before committing to a sale and rent back scheme. In addition to following the advice below, you should always compare different schemes from different firms, before committing to a decision. 

When looking for a sale and rent back scheme, you should:

• Choose a firm regulated by the FCA
• Make sure you can afford it 
• Aim for a sale at 80% of your property value, rather than 65%

To ensure the affordability of the sale and rent back scheme, you can contact the firm and request their fees, including whether they are able to offer you a range of schemes, depending on how many providers you are linked to. They are required to provide you with this information. 

Selecting a company which is regulated by the FCA will give you peace of mind and security. The presence of an independent regulator takes away risk, and provides security that your wealth is secure and protected.

Alternative to sell and rent back

There are several alternative options available to you, besides sale and rent back, if you are struggling financially. Before you take the steps listed below, there are sometimes short-term fixes to your poor financial position.

For example, it is worthwhile asking for help from your mortgage lender. Even if it seems unlikely, you will not be punished for asking for financial help.

You could also consider whether you are eligible for help from another source – for example, a government funding scheme. It is worth researching whether any of these exist, and if they do, whether you fit the criteria.

Thirdly, you may wish to consider whether equity release is a suitable option for you. If you opt for this route, then you should try to find an organisation that belongs to the Equity Release Council. Once again, this provides security that you are dealing with a trustworthy company.

Some of the other options available to you include:

• Remortgage your property
• Take on a lodger
• Sell your house on the market
• Sell using a cash house buyer

If your financial difficulties are short-term, and you need cash almost immediately, then selling to a cash house buyer may be the best option. With WeBuyAnyHome, for example, it is possible to sell your house within 7 days – therefore meaning that you will have access to the cash from this sale very quickly.

Sell your property with WeBuyAnyHome

Looking for a fast house sale and want to know how much your house is worth? We can value your house and give you a cash offer today.

Whilst we would like online valuation tools to be able to provide accurate valuations (it would certainly make the lives of our team easier!), we here at WeBuyAnyHome are not at all convinced that you can get a realistic property valuation at the click of a mouse. That is why we only ever instruct RICS qualified surveyors/valuers to assess your property. We want to give you the best and most accurate price for your property.