Selling your home to an equity release company does have risk attached to it, despite glossy leaflets talking about zero risk deals that seem to completely favour the customer. The equity release companies offering the deal are in it for their own benefit and they seek to offer a short term benefit to their prospective tenant in order to become the home owner and earn money from the ensuing investment. Kendall Partners Ltd
Often the front line of an equity release business is sales people who are not concerned with the practicalities about whether the investment is right for the customer or business but simply to get the deal secured so their commission is gained. Often they work on a commission only basis the focus is on the sales process rather than the suitability of deals. They are not necessarily malicious, however, the sales people always seek to make the investment work rather than conceding it is not the right thing for a customer. This can lead to suitability issues that are not fully revealed or appreciated by the customer until after completion.
Customers must therefore think of their own position as home owners looking to sell and whilst listen to advice that is given by the sales people; remember why it is that particular advice is being given.
The equity release company will have a flexible credit line with their bank and whenever equity can be borrowed against the customers increasing value of their property this will release more funds for future property purchases. The company relies on the monthly rental payment by their tenants to cover interest repayments to their bank. Constant surveys and valuations take place to facilitate the balancing act that is their company credit via the bank or banks they work with. Equity release businesses seek to manage debt and profit from an increasing market over time.
There is minimal regulation in this type of market place. Anyone that can obtain large amounts of credit can operate a business like this. As the businesses are often limited companies with information on company owners and directors sparse it is hard for a customer to know if the reputation of the home buying company is legitimate.
Something for the property owner to be aware of before they sell is that they will never know if their particular mortgage assumed by the new owners on their home is being paid. Of course it should be and usually is, but customers will not find out there is a problem until the mortgage company start knocking at their door at the beginning of the eviction process. It is usually too late by this time as the tenant can do nothing to legally force the equity release company to pay. Their penalty is repossession, but this does not help the tenants who want to stay in their home, usually having paid rent in good faith to do so.