If your finances have gotten out of control and you find yourself unable to get out of the hole you are in, don't lose hope. You are not alone. Many people are in the same boat, having experienced an unexpected layoff or housing situation, facing bankruptcy just because of a turn of fate. You probably think that there isn't a way out of the fix you're in, but you need to consider an underused option: selling your house and renting it back.
Clare Wilson, a single mom, went through this exact situation two years ago. After rheumatoid arthritis left her disabled, she could no longer work. She received a small sum of money from disability benefits each month, but this was not enough to pay her mortgage, let alone to feed herself and care for her two teenage sons.
After three years of massive bills and a mounting debt, Clare was at the end of her rope. She feared that the only way out was to sell the home she had lived in for thirty years. There were no other nearby
homes for sale in her price range, and rental rates were astronomical. Claire thought that she and her two sons would have to move in with some of her relatives.
Luckily, when her home was entering the foreclosure and repossession stage, Claire's friend called her and informed her on how to
sell and rent back her property. Hearing the news sparked Claire's interest. Claire decided to pursue this process, and after making a few calls, realized that this method of occupancy was a good choice. She didn't want a "for sale" sign outside of her home, as once day she hoped to own it again.
Here is how the
sell and rent back process works. Clare sold her home to a real estate firm specializing in repossessions or foreclosures. She was then able to sit down with a representative of a company and find out what monthly rental rate would work for her. She was able to select one that was low enough so she could still afford to put food on the table, but not so low that it would take forever to get her house back. The
properties to rent back, like Clare's own, would generally never undergo a change of hands.
When a person sells a house to rent back, their monthly payments help to build equity in the home. They can just continue to rent indefinitely, but they can also use their rent toward the purchase of the home. They can either save up a down payment in order to buy the house back sooner, or they can keep paying rent until they've paid the total value of the house. That way, a person can eventually buy back their house when their finances improve. Being able to stay in one's house also prevents any embarrassment arising from knowledge of one's financial straits becoming public, and they will still have the proceeds from their home available to pay off the bills that have become insurmountable.
