Beware of risky offers to “cash out” your home equity through a “sale-leaseback”
Have you seen offers to “unlock” the equity in your home by selling it and then renting it back from the buyer? The ads make these agreements — called sale-leasebacks — sound like a simple way to get cash upfront and keep living in your home. However, these agreements can be very risky and are sometimes predatory.
When you agree to a sale-leaseback, you are selling your home, and becoming a renter instead of a homeowner. The risks in the fine print often include hefty fees, exorbitant rates for rent, and possible eviction from your home if you can’t afford to pay the rent when it goes up. If you’re considering a sale-leaseback:
Take your time. If a buyer pressures you to act immediately, walk away. Selling your home is an important decision. Someone who rushes you into a sale doesn’t have your best interests at heart.
Read the fine print. If your agreement is different from what the buyer promised or is too complicated to understand, stop. Don’t rely on verbal representations that disagree with the actual, written contract.
Hire a lawyer or involve a trusted family member or friend. Home sales contracts are often complex. Hire a lawyer — or at the very least, ask a trusted family member or friend — to help you review the documents and understand the contract terms and risks.
Know the risks. If you go through with a sale-leaseback agreement, you won’t own your home anymore. That means you could be forced to leave your home if, for example, you can’t afford to pay the rent.
