Sale / Rent Back Schemes: Not Always What They Seem

As the slumping economy and ensuing credit crunch takes hold, and more and more people are struggling with their mortgage repayments, a number of companies are springing-up who offer a "sell / rentback" scheme. This type of proposal involves the homeowner having their house bought from them, for a percentage of its market value, then offered the chance to be a tenant, negating the need to have to vacate the premises.

For some, it seems like the perfect opportunity to get rid of a mortgage problem and not have to deal with the hassle of moving. However there are some critics who state that the schemes may not be all they appear to be and might actually be more trouble than they’re worth.

Some homeowners have reported receiving only half the market value of their house, with others stating the rental agreement was not upheld. There is also the risk that the company to whom the house is sold may not be able to maintain the mortgage repayments, and you, as former owner turned tenant, will ultimately face eviction anyway.

Although the general idea behind a sale and rent back is sound, the way it is handled and put in place is not, and homeowners aren’t as protected as they might think they are. As soon as they have sold their house to one of these schemes, then they have very little control over and above what is written in their contract. This forms the basis of one of the main arguments against sell and rent back companies – that the landlord can set the purchase price, rent and terms of the lease, and is very likely to be abused.

There are a lot of calls for this industry to be more highly regulated, in order to give customers the protection they deserve, and if complaints about various companies continue to rise, then the government and Office of Fair Trading will have to step in at some point and put down some ground-rules.

Do you know anyone who has sold, or may be thinking about selling, their home on one of these "Sale Rent Back" schemes? Tell us about it by clicking the comment link below. Your identity is safe, as no email addresses will ever be published here with a comment.

Credit Ignorance: What You Don't Know CAN Hurt You

Consumers remain in the dark about how the credit-scoring system works in obtaining mortgages, insurance and credit cards, costing individuals as much as $28 billion each year, according to a recent survey.

Credit scores are a vital but often overlooked part of people's financial health. The number, also known as a FICO score, determines interest rates on credit cards and is being used increasingly by insurance companies to set rates, as well as by prospective employers in hiring decisions.

Taking steps such as paying bills on time and not maxing out credit cards will improve scores. Scores also can be improved by paying off debts, rather than moving balances between accounts. Paying more than the minimum due on credit cards also improves your FICO score. Missing a single payment by more than 30 days may lower your score by 25 to 50 points.

One of the most important steps individuals can take is to obtain their reports from one of the main credit-rating companies: Equifax Inc., Experian Group Ltd. and TransUnion. An easy way to do this is through the www.annualcreditreport.com Web site the three companies run together. Consumers can obtain one free credit report each year.

According to Stephen Brobeck, executive director of the Consumer Federation of America, "People responding to the survey didn't understand that credit scores are based on payment histories and how they've used credit in the past. Many respondents said factors such as income, age, marital status, and education levels influence credit scores. They don't."

A low credit score means you'll spend more money to borrow. Raising a credit score by 30 points translates into an annual credit card finance-charge saving of $105, according to Anthony Vuoto, president of Washington Mutual Card Services. If all consumers raised their scores by that margin, he said the savings would reach $28 billion.

Have you obtained a copy of your credit report since they became free once a year? If not, you should. Getting a copy of your credit report is also a good way to detect identity theft, because there will be evidence of anyone trying to open new accounts or obtaining credit cards in your name.

Home Prices Rise Four Straight Months - Is Anyone Listening?

Amidst the gloom on Wall Street about housing someone forgot to check the stats. The National Association of Realtors® has now reported four straight months of rising housing prices, but it seems no one is listening.

According to NAR statistics, the median home price has fallen from a high of $230,200 in July 2006 to a low in February 2008 at $195,600, a drop of 15%. Since February, however, it has risen steadily every month. By May the index had risen to $208,600, up $13,000 and a full 6.6%. Another indicator, the mean home price (otherwise known as the average home price), has also shown strength and has risen from a low of $242,000 also in February of this year to $253,100, a rise of $11,100 or 4.5%. It, too, has risen every month since February of this year.

So why the crisis? Why the continual gloom and doom reports? Is this the bottom?

No one can know for sure until we all look back and can clearly define where the bottom was, but the hard data is clear. The median price has risen four straight months. The average American is out there taking advantage of bargains in their local real estate market. They are not listening to Wall Street but following their own belief that the best time to buy is when no one else is, and they are out there buying. If this keeps up, February may prove to have been the low in prices.

What do you think? Have we passed the bottom of this mess? Use our comment link below to sound off and give us your opinion. Your email address will never be published here to protect your in-box from too much mail.

Fears Grow Over Mortgage Giants

Stocks of Fannie Mae and Freddie Mac are being hammered as the housing slump spreads, but the Bush administration says it's not planning a federal takeover of the mortgage giants.

Here's the latest on the growing fears of Fannie and Freddic from AP reporter, Mark Smith…. (Video runs 2:00)

Do you think the Federal government should intervene, or stay out of it? Tell us what you think by clicking on the comment link below and sounding off on this subject. Your email address will never be published here…

Home Energy Audits

Free energy audits from your utility company are a popular way to save up to 30% on your energy bill… but you can always do it yourself!

Money Editor Stacy Johnson explains some of the areas you need to look at if you decide to go the do-it-yourself route, and just what you might expect to pay to have a professional do it for you. (Video runs 1:21)…