One of the more vibrant areas of the property market these days is the sale-and-rent-back sector. We’ve all seen the ads for companies that promise to help you clear your debts by buying your house from you then continuing to allow you to live there for a monthly rent.

It sounds like a potential win-win situation if you’re in a bit of a fiscal pickle, but when it comes to an overall victory, the odds are severely stacked against you. Short-term leasing is the biggest concern, and housing charity Shelter are worried that sellers run the risk of eviction shortly after handing over the keys to their home. Not to mention the fact that these companies are taking advantage of the desperate by buying their houses at well below market value in the first place.

But now the Financial Services Authority have come shambling into view, promising to clean up what looks like a pretty mucky business. The only trouble is, all they’ve got is some vague guidelines and a few half-baked promises, with full regulation not due until July 2010. Those crazy bastards!

In a nutshell, if you’re thinking about selling your house then renting it back from one of these companies, don’t. You’ll be leaving yourself wide open to being ripped off. Seek professional advice to find an alternative solution to your money worries.

For more info on the sale-and-rent-back cowboys, check out this excellent piece from lovemoney along with their in-depth investigation from earlier this year.

What ya call a sucka punch

The North East of England is being hit hardest by the negative equity situation caused by the housing price crash. There, approximately 10% of owners owe more than their house is worth. By contrast, in East Anglia and Scotland, the figure is closer to 1%. (the figure is approximately 4.8% in the UK as a whole). According to an Oct. 2008 article in the Telegraph, two million could get caught in the negative equity trap by 2010.

So what should you do if you are in this situation? Do you need to do anything at all? Here is what the Citizens Advice Bureau suggests:

1. If you are still able to make your payments, you should probably wait it out. According to a recent BBC story on the subject, if you can keep up with the payments until the market picks back up, you’ll most likely come out fine.

2.The government recently launched the Homeowners Mortgage Support for borrowers suffering a temporary loss of income. This program can allow you to delay some mortgage payments for up to two years. You’ll still owe the money, plus interest on it, but it is a much less catastrophic arrangement than losing your home. There are a number of qualifications, but two of them are:

• having savings of less than £16,000
• having less than £400,000 outstanding on your mortgage and any other loans secured against your home

3. Contact your local CAB before signing up for any mortgage “rescue” scheme. With some “sell and rent back” arrangements you could end up paying very high rent and even being evicted. Proceed carefully, in other words.

If you have any thoughts or suggestions on the issues regarding buying vs renting in the current climate, please leave your comments below.