Home Equity

How to Evaluate a Sale-Leaseback (Key Tricks of the Trade)

By Amanda Hoey
evaluate a sale-leaseback

As you pay down your mortgage, you build what’s called equity. That’s the difference between your home’s value and your remaining mortgage balance. In other words, it’s the amount of your home that you own. Naturally, the longer you’ve been making payments, the more equity you’ll have.

You can let the equity sit there, but did you know that you can access it in the form of cash? One of the most common ways to do that is with a home equity loan or home equity line of credit. While many homeowners use these options, they require taking on additional debt, which may not be the right solution for you.

Enter a sale-leaseback. With this solution, you access your home’s equity more unconventionally. You sell your home. Here’s the thing, though – you don’t have to move. Instead of packing, searching for a new home, and moving, you stay in your home as a tenant. While this sounds great, you’ll want to keep something in mind. Not all sale-leasebacks are the same. Here, you’ll learn how to evaluate a sale-leaseback to make sure you’re getting the best possible option.

Benefits of a Sale-Leaseback

First, let’s take a look at the benefits of a sale-leaseback:

  • You drop your mortgage payment. Instead of making mortgage payments, you pay a monthly rent. You work with the company buying your house to determine that amount.
  • You don’t have to move. You don’t have to uproot your family, search for a new home, or worry about expensive moving costs.
  • The company takes care of the costs of homeownership. After you sell your home, the company takes over property taxes, upkeep, and repairs.
  • You get access to your equity without taking out an additional loan. You’re selling your home rather than accruing more debt. That means you don’t have to worry about making more monthly payments.
  • There are no restrictions on how you can use the money. The money is yours to do with as you please.
  • You protect yourself against real estate downturns. If home values are falling, you can sell your home to protect your equity (instead of possibly watching it drop).

Basic Eligibility Requirements

When it comes to evaluating a sale-leaseback, you won’t have the same strict standards as a home equity loan, home equity line of credit, or other loan options. That’s because you aren’t taking out a loan. For the most part, the most significant criterion is that you own your home. In general, you won’t have to worry about having perfect credit or meeting specific income requirements. You will, however, need to make monthly lease payments. So you will need to ensure you’ll be able to pay your rent to continue living in the home.

How to Evaluate a Sale-Leaseback

As we mentioned before, no two sale-leasebacks are the same. Each company is different. As such, you’ll want to evaluate your options to ensure you’re getting the best deal.

How Quickly Do You Receive Your Funds?

The process is different for each company. You don’t want to be left waiting for an unknown amount of time to get access to the equity in your home. Be sure you know how long it will take for you to receive your funds. If you need them quickly, this may be an essential factor.

How Much Can You Get?

First, some companies may try to purchase your home for a discounted price. Even if you’re trying to sell quickly, you’ll want to avoid this trap. Instead, look for one that will purchase your home for fair market value.

You’ll also want to find out how much of that sale price you’ll get. In many cases, you’ll be responsible for fees and closing costs. Keep in mind you may not get the entire amount, at least not right away. With some options, you may only get a set percentage upfront. You may, however, receive the remainder if you decide to move later.

Are the Lease Terms Flexible?

Getting stuck in a lease can be frustrating, especially if you don’t plan to stay in your home that long after you sell it. Or, maybe you want to stay indefinitely. In either case, you’ll want to evaluate sale-leaseback agreements that provides flexibility.

Can You Repurchase Your Home if You Want?

With some companies, you won’t have the option to repurchase your home, even if you want to. You may have to either remain as a tenant indefinitely or move. If you’re going to use a sale-leaseback as a temporary solution and plan to repurchase your home, look for a company that provides that option.

Can You Get Appreciation if You Decide to Move?

Some homeowners use a sale-leaseback as a way to give themselves time to look for their next perfect home. That way, they don’t have to worry about timing the sale of their house with the purchase of a new one (or rush into buying a home they might not love). Depending on how long you stay, your home may increase in value. Some companies will give you that increase if you decide to move, which can put a little extra cash in your wallet.

How Much Say Will You Get if You Decide to Move?

If you decide to move, the company that bought your home may put the property on the market. If that’s the case, find out if you’ll have any say in the process. You may be able to help set the sale price, choose the listing agent, and more. 

Is a Sale-Leaseback Right for You?

If you’re looking for an alternative to conventional home equity loans, HELOCs, and other loans, a sale-leaseback may prove to be an attractive option. Before you commit to one, however, you’ll want to understand what each sale-leaseback company offers. Comparing your options is essential for ensuring that you get a sale-leaseback that works best for you.

EasyKnock is one such option. With our sale-leaseback program, you sell us your home and you can stay as a tenant for as long as you wish. You gain access to your equity quickly, get up to 85 percent of your home’s value in cash, and you get a say in your monthly rent. If you decide to move or rebuy your home later, you can! You get to choose the listing agent and help set the asking price. What’s more, you may even get appreciation if your home increases in value between the time you sell it to us and we sell it to a new owner.

If you’re ready to evaluate a sale-leaseback, we’re here to help. Visit EasyKnock for more information and see if your home qualifies today.

Key Takeaways

As you pay down your mortgage, you build what’s called equity. That’s the difference between your home’s value and your remaining mortgage balance. In other words, it’s the amount of your home that you own. Naturally, the longer you’ve been making payments, the more equity you’ll have. If you are still unsure of alternative options to securing this equity or want help as you evaluate a sale-leaseback solution, consult a financial advisor to discuss your options.

Home Equity
Amanda Hoey
Written by Amanda Hoey
Content Marketing Manager for EasyKnock, financial and real estate writer.

This article is published for educational and informational purposes only. This article is not offered as advice and should not be relied on as such. This content is based on research and/or other relevant articles and contains trusted sources, but does not express the concerns of EasyKnock. Our goal at EasyKnock is to provide readers with up-to-date and objective resources on real estate and mortgage-related topics. Our content is written by experienced contributors in the finance and real-estate space and all articles undergo an in-depth review process. EasyKnock is not a debt collector, a collection agency, nor a credit counseling service company.