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What is a sale-leaseback program?

There are some lenders and real estate investors that offer a program known as a sale/leaseback program. This is typically a program that should be used only after all other refinancing options have been exhausted.

Typically, you will agree to sell your home to an investor at a below market price. Some of the proceeds of the sale will be earmarked to pay off debts, etc. You then will agree in a contract to rent your property from the investor for a period of 1 year. Many times the company coordinating the process will enroll you in a credit repair program as well. After the 1 year period you then can re-purchase your home from the investor.

The benefits of a sale leaseback program are that you get to stay in your home and get the opportunity to repair your credit for 1 year. The drawback is that you are selling your home at a lesser price and re-purchasing it at a later date at a higher price. For many in foreclosure situations and other extenuating circumstances , this is a viable option.

There are a handful of Sale and lease back or "lease option" programs which allow you to sell the home for the appraised value, remain in the home for the year, and purchase it back at the same price, irrespective of whether the market ghoes up or down. They are more difficult to execute in practicality, but much more beneficial if you're in a market with even or rising prices.

A sale and leaseback should always be your last option when all other forms of refiancing your property have been exhausted. A sale leaseback is designed to allow you to reuprchase your home at a future date. If considering a sale and leaseback arrangement, be sure to consult a competent, real estate attorney to assist and protect you in this agreement.

You should also check on references with the firm handling your sale-leaseback. See what kind of experience the company has in negotiating down payoffs for debts. Ask what kind of programs they have for improving your credit. Make sure they are setting you up for a successful re-purchase of your home.

For more information regarding this topic, please call Mike Williams at 516-921-9000 or email mwilliams@northshorefunding.com.