Published on : 27 December 20193 min reading time
Are you having financial difficulties? The sale with a repurchase agreement can be the solution to your problems. However, this option is reserved for owners of a property or a car. But how does it work? And what are the advantages and disadvantages?
What exactly is a sale with a repurchase agreement?
Repurchase agreements are a selling technique that has become increasingly common over the last 10 years. It allows individuals who cannot have access to traditional credit to get out of a financial impasse: indebtedness, bank records, cash flow difficulties… It is a very interesting solution that allows avoiding a legal seizure and an auction.
The sale with a repurchase agreement is particularly aimed at people who own real estate. However, the sale with right of repurchase for cars has also been on the rise lately. It’s a great alternative to microcredit and pawn-broking for cars. They can obtain liquidity in the shortest possible time. The sale offers the seller the possibility to buy back his property before the end of the term.
In the case of a house sale, the seller has the right to occupy the property in return for an occupancy allowance, the amount of which is freely determined by both parties.
How does the sale with a repurchase agreement work?
A priori, a professional should be called in to carry out an appraisal of the property. The selling price is fixed on average at 60% of the real value of the property. This is not at all advantageous for the seller. If he does not succeed in raising the money necessary to buy back his property, he will lose a lot of money.
Then, we proceed to search for an investor. The contract for a sale with a repurchase agreement must be drawn up in front of the notary, in the presence of the buyer, and the notary’s fees are paid by the buyer. In any case, the conditions of sale and purchase will be fixed in advance. The sum obtained will be paid to the notary who will then pay the creditors and keep the remainder as a security deposit.
The former owner can then buy back his property without waiting for the term of the contract when his financial situation stabilizes. On the other hand, if the period has elapsed (within the limit of 5 years) the investor will definitively become the owner of your property.
What are the precautions to be taken?
The repurchase agreement is a kind of loan without credit investigation. Easy to obtain, it can quickly compensate for an urgent need for money. Nevertheless, if you wish to continue to occupy a dwelling sold with a repurchase agreement, check the amount of the occupancy allowance. Indeed, the investor is free to set his price. So don’t be fooled. Negotiate!
The duration of the annuity must be clearly indicated in the deed of sale, ranging from 6 months to 5 years. If you have omitted this detail, the buyer can take possession of the property and sell it after 6 months if it has not been repaid.
To close, if you exercise your right of redemption before the term, you must pay the investor compensation. On the other hand, make sure that the amount required is not too high.