Many homeowners are looking to sell and rent back their own homes. The main reason behind this trend is that they have borrowed beyond their means. They need to find a way to save their home from foreclosure, but they still want to remain in the home. These are the borrowers that took advantage of the adjustable rates (ARM) to now see their payments steadily growing. Usually, they are the same borrowers with high personal, rotating debt as well. They are in a position where something has to give.

Companies are looking at purchasing these homes from beleaguered owners at less than market value – sometimes only 70%. They do usually pay the costs of any fees associated with the sale. The company then rents the house back to the original owners for less than what they had been paying in mortgage payments. Most of the firms don’t do anything that would tell the neighbors there was a problem. In a society that is all about keeping up appearances, the sell and rent back opportunity may allow the owner to “save face.”

The arrangement can seem very attractive to a home owner who is facing an aggressive buyers market. Not only are the rising interest rates causing housing prices to fall, but other owners in a similar circumstance have flooded the market with houses that must be sold – and sold right now. On the open market, homes are selling for as little as 80% of their value. When you add in all the fees, the sell and rent back plan doesn’t seem so far fetched.

Although it may seem like a good solution it is not the best solution or even the first one that homeowners should look at. Before they sell and rent back their home, it would be wise to look into a remortgage using any equity that has been built up in the property.

Kathryn is a freelance journalist covering the property market. She advises on sell and rent back property sales and also blogs at Home Move.