Sale-leaseback Agreements Gain Popularity

July 17, 2008 | Filed Under Real Estate News, Real Estate Trends and Statistics, Real Estate Investment 

With the threat of foreclosure looming for a growing number of homeowners, some are trying more unconventional methods to avoid losing their home. The Wall Street Journal reports that real estate agents are seeing an increase in sale-leasebacks, in which homeowners sell their home and then rent it back from the new owner. Although the concept is neither new nor common, it is becoming more popular, the Journal reports.

Such arrangements might work well for homeowners who are barely making their mortgage payment or who may soon default on their loan. However, some real estate experts are wary of leaseback agreements and warn that, in much of the country, the seller may end up paying just as much for rent as they had paid for their mortgage. My question is: If they can’t afford the mortgage, how will they afford the rent?

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