Anumber of companies have sprung up in cyberspace that offer an attractive proposition if you are faced with the dire possibility that your home might be repossessed.
Type “sell and rent back” into Google’s search engine (www.google.co.uk) and the names of more than 20 companies crop up, which claim to buy homes and rent them back to owners.
Websites such as www.approvahomebuyers.co.uk, www.a-quick-sale.co.uk, and www.rentbackmyproperty.co.uk are reported to be gaining share in this growing sector catering to indebted Britons willing to release equity by selling their homes at a loss.
These companies agree to buy homes for 70 to 80 per cent of their market value and pay all relevant fees and costs. In return, sellers get the chance to rent back their homes at a rate less than their previous monthly mortgage payments.
Deals can be accomplished quickly and discreetly so the neighbours need not know. Surveyors are employed to assess the property’s value. In some cases, completing the private transaction between buyer and seller can take less than a week.
The growing popularity of companies targeting those who have fallen into arrears on mortgages and want to avoid repossession or bankruptcy underscores the degree to which rising interest rates are putting further pressure on people struggling to pay debts.
The number of individual insolvencies in England and Wales reached record levels in the first quarter of 2007 topping 30,075 – up 24 per cent from the comparable quarter last year, according to government figures.
Richard Watters, managing director of A-quick-sale.co.uk, says his company, which is one of the biggest in the sector, has bought and sold back homes for more than 1,000 tenants in the four years since launch. So-called “rent backs” now account for almost a third of business for the group, which also buys homes from those wanting to relocate quickly for other reasons.
Keith Woodward, a spokesman for Approva Homebuyers, estimates his company completes three to four such transactions a week for new clients who are interested in renting back their homes.
Watters says: “We live in a culture where people are more inclined to borrow than they were a generation or two ago and property prices have risen dramatically. Remortgaging to release equity can be an affordable option at the time people do it, but situations change. A combination of factors mean more people are finding it difficult to afford their mortgage payments. The level of unsecured debt we’re seeing each day is quite high.”
Unlike pawnbrokers or auctioneers, representatives from this industry tend to keep quiet about their work and only post ads on search engines or in newspapers.
But they may quietly be launching something of a revolution in the property market. Analysts estimate that more than 200 such companies have been launched in the UK in the last year alone. Why? Barriers to entry are minimal; property prices remain high; buying houses from distressed sellers at a discount can offer high returns; and the cost of posting a daily advertisement on Google is just £100 a day.
“I’d say you see five to six new players in this space on a fortnightly basis. And a lot of these guys are one-man band property investors,” says Hywell Luke, a director at Quickmoveproperties.com, a company specialising in quick sales which does not offer sale and leasebacks.
It is important to view these companies with caution. Standards can vary widely and customers have little protection as the industry is not regulated. Analysts warn it is not uncommon for some unscrupulous companies to establish a tenancy agreement with a client and then evict him if the property can be resold at a gain.
Watters says A-quick-sale.co.uk is not usually in a position to guarantee a tenancy agreement longer than six to 12 months. “If they do have intentions of staying long-term, we want to know so that we can be sure we can commit to that as well from an ethical point of view,” he says.
Approva Homebuyers, which caters exclusively to this market, guarantees tenants the right to live in their homes for as long as they wish. They are also able to buy back their homes at the market price at any time should they wish.
