Unique Way to Unlock Your Home Equity and Remain Living in the Home

Selling a home with a long-term rent back agreement is a unique way to sell a home. It allows the home seller to cash out all of the equity they have in the home but remain living in the home after the sale. Selling a home with a rent back is not a widely known option but like all best-kept secrets, as more Texas homeowners learn of the benefits of selling with a rent back it is quickly growing in popularity.

What is a Home Sale with a Long-Term Rent Back?

A sale with a long-term rent back is the sale of a home to an investor who agrees to “Rent Back” the home to the seller on a short or long-term basis. It is similar to selling a home the traditional way except it has two unique features that make it attractive and convenient for many home sellers.

First, the home is sold to an investor who offers a “Home Sale with a Long Term Rent Back Program” which can also be called a Leaseback or Sell and Stay Program. Many sellers prefer selling to an investor because there are no open houses, they save the 6% commission, the home is sold as-is, and they can shop for the highest offer from the comfort of their home. In addition, selling to an investor eliminates many of the risks and hassles of selling to an individual as they typically pay cash and close quickly.

The second unique feature is the rent back. The home sellers get all of the benefits of selling (think of all that cash) with the added benefit of not needing to move out until they are ready. It is like getting a home equity loan for 100% of the value of your home. You also get the added benefit of not being responsible for the future repair and improvement of the home. When the home needs a new roof or a new fence the work is done at the expense of the new owners/investor.

Why is a Sale with a Long-Term Rent Back Becoming Popular in Texas?

The sale with a rent back is becoming very popular in states like Texas that have very stringent homestead and cash-out refinancing restrictions. In Texas, and many other states, the maximum home equity loan you can obtain is 80% of the home value. So if your home is worth $450,000 the maximum home equity or cash-out refinance loan you can obtain is $360,000. That leaves $90,000 in value you cannot access or use. But what happens when you have an unexpected emergency or other financial stress and you need access to that $90,000 in trapped equity? Do you have to sell the house and move out?

The sale with rent back resolves this problem by giving you access to the locked-up equity and allowing you to remain living in the home. Yes, you are still selling the home but you are doing it on your terms and you are not required to find a new place to live. Plus, when you have an emergency you need the cash now, not 2 to 3 months later. Selling to an investor with a rent back gives you the cash you need quickly, in a matter of days or a few weeks at most.

For many homeowners in states like Texas, the sale with rent back is the best and in some cases the only way to unlock the equity in your home and remain living in it.

Homeowners Who Benefit the Most from a Sale with a Long-Term Rent Back

A home sale with a rent back agreement is an ideal solution for homeowners who are facing the following circumstances:

1. The homeowner needs the cash and certainty of the sale of their current home to build their new home. The sale with rent back will give them the cash they need to build the new home and they can stay living in the current home until the construction of their new home is completed.

2. Families that are facing an emergency or short-term financial stress that need access to the cash equity in their home but want to stay living in the home they love. They get the cash they need quickly without the stress, hassle, and expense of moving.

3. Homeowners who know they will be relocating sometime in the next 6 to 12 months. The relocation becomes simple and stress-free when you have already sold your home, have the cash in hand and can remain living in your current home until the relocation is finalized.

4. The retiree wants the cash to enjoy their golden years but is not quite ready to move from the home they are comfortable in. They will get the cash to go enjoy their life and the ability to move when the time is right for them. They also get the added benefit of fixed housing expenses without the potential for surprise home repair bills. The investor is required to maintain the home at their expense.

5. The divorcing couple when one spouse wants to remain living in the home with the kids and the other spouse needs the cash equity from the home to start over. The sale with rent back will give them both what they want – cash from the sale and the one spouse can remain living in the home with the kids.

6. Someone who is having financial difficulties and is facing foreclosure. The sale with rent back will prevent foreclosure and they will get the cash needed to help them overcome their current financial crisis. And since they are selling with a rent back they do not need to move. This solves the problem of trying to find a decent place to lease when you have tarnished credit due to a foreclosure filing.

7. The elderly homeowner who is in a period of transition. Many elderly would like to sell their home and transition on their terms and timeline. The home sale with rent back gives them the freedom and cash to transition without becoming a burden or relying on family members.

As you can see from the above list the one common thread is the homeowner’s desire to unlock the cash equity in their home but remain living in the home for an extended period of time.

Is the Home Sale with Long-Term Rent Back Right for You?

Although a home sale with rent back has many benefits everyone’s home and situation is different so the program might not be available or a good fit. In addition, there are very few investors that offer a sale with a rent back program and the ones that offer the program have specific requirements. So not all homes or sellers will qualify for the program.

There are several general characteristics of a home and homeowners who would benefit most and qualify for a sale with a rent back program. These include:

• The home is located in an established neighborhood that is located within a major metropolitan area or an adjacent suburb. Most investors will not offer the program in remote or rural areas.

• The homeowner has sufficient equity in the home. Transferring ownership of a home to an investor typically costs substantially less than selling through a realtor but there will still be a few thousand dollars in fees. If there is not enough equity the transaction will not be financially feasible.

• The sale and obtaining the equity helps resolve an emergency or temporary financial challenge. If it does not resolve the problem then you should reconsider your options and look for a better solution.

• You want or need the cash but wish to remain living in the home under a short or long-term lease and understand that leasing is not the same as owning the home. For example, you can’t just repaint a room with the special color you like. You will need to get permission before making any changes to the home.

It is important for homeowners to carefully consider their options to ensure the home sale with rent back will provide them the benefits and solutions to their unique circumstances.

What Companies Offer a Sale with a Long-Term Rent Back Program?

Although a sale with a rent back agreement is becoming more popular there are still only a handful of companies/investors that offer a home sale with a rent back program. So you may need to do some research to find a company that offers the program in your area. We suggest you do a Google search with the terms “Sell Your Home with Long-Term Rent Back” or “Home Sell and Stay Program” and you should find a reputable company that offers the program in your area.

The Bottom Line

The home sale with a rent back agreement is a unique program that can help many Texas homeowners overcome the challenge of unlocking their home equity without sacrificing where they live. Although this article lists the people who will benefit the most from a sale with a rent back agreement there are many other situations and sellers who can also benefit from this program. We encourage you to explore your options and find the solution that is best for you and your family!