by Ken Reetz

Created on: June 28, 2008   Last Updated: December 01, 2011

Selling your home and then renting it back is the last option a person should consider; there are better ways to get out of mortgage trouble and keep your home. Of course, your options depend largely upon whether or not you have equity to bargain with. If you do, you should be able to make a better deal than a simple rent back agreement.

Your best bet is to face your situation head on and talk with your lender about your difficulties - the earlier the better. The business climate for mortgage lenders has changed from just a few short years ago and you can expect a lot more assistance than ever before. There is considerable government pressure on lenders to do whatever they can to find workable solutions for people having mortgage trouble so it pays to see what can be done.

Here are a few links that will be helpful in rounding out that part of this subject:

• http://www.hud.gov/foreclosure
• http://www.federalreserve.gov/pubs/foreclosure/defau lt.htm
• http://www.freddiemac.com/service/msp/avoid_foreclos ure.html

If that doesn't work, and traditional re-financing isn't possible, for whatever reason, you may still be able to find private money through newspaper ads or the like. The private money you are seeking will invest enough money in your home to bring all mortgage payments current and possibly a little extra for remodel, or whatever. Your equity position and the marketability of your home all play a part in what kind of a deal you can make.

In return for this money, you will be selling part of your interest, or equity, in the home. The clock will tick for 2, 3, 4, or more years and then the investor will expect you to buy out their interest at whatever amount is in your agreement. Perhaps you will be able to refinance at that time or simply sell the home in order to cash out the equity.

If you don't have equity and everything else has failed then it becomes strictly a matter of saving your credit. Any arrangement you make that will protect your credit is likely a better alternative than not doing so. In that case, the sell and rent back option is perfectly logical.

Still, there are serious vulnerabilities in this type of agreement and you must act wisely. Do your due diligence on the subject and make the best deal you can. Here are a few things to consider:

(1) Know the true value of your home not a quick guess from some web site, you must have the personal inspection from someone who knows the market. The Internet doesn't know the true similarities of your home compared to other homes. Nor can it uncover the various urgencies or motivations that may have affected selling prices of similar homes - you need a person to do that. Most Realtors will do this for you at no charge. Otherwise you might sell your home for far less than you should.

(2) Make sure your new landlord cannot sell the home earlier than the dates written close any loop holes because this has happened many times.

(3) Allow as much time as possible to make a final decision. Never trust anyone that is pushing you to make huge decisions in a hurry that includes yourself. Remember however, it is also careless to delay until you're out of time so use what time you have to do a proper job of educating yourself and researching the people you will be dealing with.

The success of 'sell and rent back' agreements depend upon choosing the right individual or company to partner with, and of course the fine print. The ideal scenario would have you working through an attorney to make sure you don't get out of one bad situation and into an even worse one. A little money could save you a lot.

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