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Sale/Leaseback: A Foreclosure Rescue Strategy Worth Understanding
Thanks to Gordon for requesting this topic. Sale/leaseback isn't something I've personally done, for reasons disclosed below. But it's a legitimate strategy worth understanding, especially in 2026 when foreclosure filings are up 19% year-over-year, with completed foreclosures spiking 32%.
What Is Sale/Leaseback?
Simple concept: a homeowner facing foreclosure sells their property to you, you pay off the lender, or reinstate the loan and take ownership of the property subject to the existing loan. Then you lease the property back to the former owner. They transition from owner to tenant, you become landlord of an occupied property.
The seller avoids foreclosure on their credit, and stays in their home. You get a property with an immediate tenant and potential for future sale or refinance.
Why It Can Work
For the Seller:
Stops foreclosure immediately
No moving costs or disruption
Credit protected from foreclosure damage
Time to financially recover while staying in familiar surroundings
For the Investor:
Instant tenant (no vacancy period)
Motivated seller means favorable purchase terms
Property comes with someone who has emotional attachment (less likely to trash it)
Multiple exit strategies available
The Real-World Challenges
Here's where theory meets my concerns:
The Rescission Problem: In Georgia (where I’ve done most of my investing) and other states with rescission laws, homeowners can change their minds within a specific timeframe after closing. You've reinstated their loan, paid costs, taken ownership - then they rescind. You're owed money you'll never collect.
The Ownership Confusion: People who've owned a home for years sometimes "forget" they're now tenants. They stop paying rent. They make unauthorized changes. They resist when you need access for repairs. The emotional attachment that seemed like an advantage becomes a liability.
The Reputation Risk: NPR investigations found that residential sale-leaseback companies have faced significant criticism, with deals costing some people tens of thousands in equity, and most people never buying their homes back NPR. Even done ethically, you're dealing with desperate people in crisis. One bad experience goes viral, and suddenly you're "that predatory investor."
When It Might Work
Despite my reservations, there are scenarios where this makes sense:
Short-term arrangement (3-6 months) with clear buyback option at predetermined price
Seller has reliable income but hit temporary crisis (medical emergency, job loss with new job secured)
Property has significant equity cushion
State law protects your position adequately
You have strong lease with clear remedies for non-payment
My Hesitation
The potential for things to go sideways has kept me from acting on this strategy. The risk-reward calculation doesn't work for me when:
Legal protections favor the seller/tenant
Emotional dynamics complicate landlord-tenant relationship
Reputation damage from one bad deal outweighs profit from several good ones
That said, investors I respect do this successfully. They mitigate risk through:
Thorough vetting of seller's situation and character
Strong legal documentation
Clear communication about role transition
Fair but firm lease enforcement
Building in equity cushion for protection
The Bottom Line
Sale/leaseback can be a win-win when done right. Seller avoids foreclosure and stays in their home. Investor acquires property with immediate cash flow.
But it requires more finesse than traditional acquisition strategies. You're not just buying a property - you're managing a complex human situation with legal, financial, and emotional components.
If you're considering this strategy, talk to an attorney familiar with your state's laws. Understand your risks. Have strong documentation. And be prepared for the relationship dynamics that come with your tenant being the former owner.
Gordon, I hope this helps. Readers, if you've successfully done sale/leasebacks, I'd love to hear how you've structured them to protect both parties.
LIVE WORKSHOP this Saturday: Unlock Your Potential
This Saturday, I'm hosting a 90-minute live workshop for agents who want to stop walking away from listing appointments empty-handed. You'll learn how to present multiple solutions to every seller—traditional listing, cash offer, or creative terms—so you win either the deal or the commission. We're covering the numbers you need to know, the exact worksheet I use on every property, and walking through a real case study together. Saturday, January 30th, 10:30am-12:00pm Eastern. Only 100 spots available. Register here for $97 →
