Yellow Apricot instead of Sale and Rent-back schemes
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DONT SELL YOUR HOME AND RENT IT BACK
There are countless companies offering to buy your home off you in a matter of days and allowing you to rent it back from them. This is how the deal normally works:
- You sell your home to the home buying company for an agreed price
- The home buying company allows you to rent it back at an agreed rent so you don't have to move
- Some time in the future (usually up to 2 years) you can buy the home back at an agreed price
- You keep any increase in equity if you buy back within the agreed time
- If you don't buy your home back, the home buying company keeps the house but you can still rent it
What people in these situations don't realise is that whether or not they buy their own property back, they still lose thousands upon thousands of pounds when they simply have no need to. They are throwing away the equity in their homes in an attempt to save themselves from getting repossessed with little hope of ever getting their home back.
Example :
Mr & Mrs Hart own a home worth £200,000 and their monthly mortgage repayment is £750 on a mortgage of £140,000. They are in mortgage arrears by more than 4 months. Their lenders have instructed solicitors to ask the Court for a Possession Order and Mr & Mrs Hart have received a date from the Court which is in 6 weeks time.
They cannot afford to pay off the arrears of £3000 and are doomed for repossession. Valuing their house at £200,000, a Home Buying company which advertises as buying your house "fast" offers to buy the house from the Harts at £150,000 and to rent it back to them at a monthly rent of £600 per month. The £150,000 is 75% of the value of the property. The Harts have an option to buy the house back at any time within the next 2 years at 95% of the value now, which is £190,000.
While Mr Hart is reading the newspaper advert from this home buying company so he can phone them to seal the deal, Mrs Hart sees an advert on the opposite side of the newspaper advertising Yellow Apricot as an alternative to this and decides to call Yellow Apricot.
Yellow Apricot advises the Harts to enter their home into the next Yellow Apricot Auction with a reserve price of £175,000 and immediately contacts the Court and gets the Possession Hearing postponed to a date which is after the Auction date. On Auction day, the house sells for £178,000. After paying off everything, the Harts end up walking away with just over £30,000 in cash.
The Harts then decide to rent a house for £600 per month and 3 months later manage to find a bargain at a Yellow Apricot Auction for £100,000. It needs about £5000 spent on it to make it homely. The Harts buy this house and take out a new mortgage for £80,000 with a monthly mortgage repayment of £500.
Had they sold their home to a home buying company, they would have lost their home as they would no longer own it and they would have to pay an extra £40,000 plus purchase costs if they wanted to buy it back again. They would only be able to buy it back within 2 years.
The Home Buying companies that offer deals like this know that it is unlikely that you will be able to come up with the money to buy back your home and even if you do, they will make a huge profit out of it. In the example above, if the Harts had gone for the deal and come up with the money to buy the property back, the home buying company would have profited by £54,400 on an outlay of £150,000, giving them a return of 36% in only 2 years (£40000 capital plus £14400 rent). If the Harts could not come up with the money, the home buying company would still be happy, owning a property worth over £200,000, when they had only paid £150,000 for it.
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