In the real estate jargon there are terms that are totally unknown to us or we do not know the exact content. When you are buying real estate and you find yourself in a financial impasse, you can find a way out in different ways, provided you do not find yourself banned from banking. But here again, a glimmer of hope can be seen under the name of summary sale or « sale with the option of redemption ».
What is the repurchase sale?
Very little known to the general public, the repurchase sale allows you to get out of a bad financial situation when you have a mortgage on your back.
This sale dates back to the Middle Ages when it mainly concerned land, it was rehabilitated by Napoleon Bonaparte on March 16, 1804. It integrates the civil code under the article numbers 1659 to 1673, several times modified, the articles keep the same background content.
From the Latin « Emere » meaning « To buy » with the prefix « re » giving a sense of repetition, we understand the definition of this term. The repurchase sale is a sale with the possibility of redemption.
This sale differs a lot from the mortgage or the repurchase of credits. It’s a sort of conditional bailout, but in another sense, it’s our only chance to keep our property.
- At the level of a repurchase of credit, we seek the need to breathe a little by paying smaller monthly payments, but we lengthen the repayment time and in the end, the credit is more expensive.
- The mortgage allows us to have some liquidity by pledging part of the house that has already been paid for. You can redeem your mortgage and once again become the sole owner of your property.
For these two options, we must not appear in the FICP, the National File of Incidents of Reimbursement of Credits to Individuals. On the other hand, for the sale in repurchase, the fact of being registered on this file is not an obstacle.
Operation of the sale with repurchase
It is generally during an interview with your banker or the credit agency for real estate mediation that we hear about this option for the first time.
We must go through a notary who will take note of the entire transaction and inform the parties of their rights and duties.
- The current owner becomes the seller, the buyer is an investor, he is not fundamentally the owner of the property.
- A duration of the contract is determined, between 6 and 60 months, that is to say a maximum of 5 years.
- A transaction amount is studied and proposed, then accepted by the parties.
The amount is less than the value of the property. The seller can stay on the premises if the parties agree on this point. On the other hand, he will have to pay rent for as long as he occupies the accommodation during the contractual period.
He obtains cash to pay off his debts, get back on his feet and get out of the red at banking levels and payment incidents. The notary keeps the excess amount which will be deducted from the amount to be reimbursed.
The investor does not have the right to do any work or resell the property before the end of the contract.
At the end of the contract, the seller must reimburse the investor as well as the sum of compensation previously discussed and pay the amount of the costs of the notarial deeds at all levels, sale and redemption.
What to pay attention to?
If this sale is the only solution to get your head out of the water while keeping your property, it can be dangerous for the seller owner. This is why we strongly advise you to call on companies specializing in real estate portage such as Médiation Immo who will be able to support you and guide you through all the steps.
If the owner finds himself in the obligation to sell his property in repurchase, it is that he is in great financial difficulty, this one can be transient or chronic. Some people are unable to manage their budget properly and the trap may close in on them.
Indeed, if the seller continues to live in the property, he must pay monthly rent, if he forgets or is unable to do so even just once, the investor is entitled to terminate the contract, keep the property, and kick the seller out.
If the seller pays his rent correctly but has not been able to settle his other debts, if he is still on file, he will not be able to apply for a mortgage in order to redeem his property. The investor then becomes the owner and can keep the seller as a tenant or not and even increase the rent.
You have to be sure of your shot, if you want to keep your property. Let’s not forget that it was « sold » at a loss, well below its value, and that is what the investor is looking for, the flaw, the non-payment. Although not all investors are so inflexible, it is better to follow the terms of the contract.