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Are Sale-Leasebacks a Good Idea? Some May Never Be Homeowners Again | WSJ - YouTube
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(fast-paced music)
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- [Narrator] The US
housing market is booming.
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5.6 million single family
homes were sold last year.
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That's more than at any time
since the 2006 housing bubble,
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according to the National
Association of Realtors.
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And more and more, the
buyers are investors.
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According to John Burns
Real Estate Consulting,
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investors purchasing homes to rent or flip
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currently make up about 20%
of all US housing sales.
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During the pandemic,
millions of homeowners
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have fallen behind on their mortgages,
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according to the Mortgage
Bankers Association.
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And rental home investors are preparing
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for a potential windfall.
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Some investors are finding homes
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through a growing niche
known as Sale-Leasebacks.
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That's a transaction
where a property owner
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sells a home, and then rent
it back from the buyer.
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Are programs like these offering
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an opportunity to homeowners,
or taking one away?
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(wind chimes clanging)
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- It's where I taught my
kids to swim, you know it's,
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it's just little things, you know.
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My first big major purchase
I ever made my life.
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I don't really see myself
living anywhere else,
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or really wanting to.
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- [Narrator] Blaine Marburger
has lived in his home
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in Denison, Texas outside of
Dallas for nearly 20 years.
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He never expected he'd now be renting it
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from a New York Real
Estate Investment Company.
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- [Blaine] I kept falling short.
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- [Narrator] After the
pandemic ravaged his finances,
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he found a company
through an internet search
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that offered to buy
his house for $180,000,
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and rent it back to
him for $1,600 a month,
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with the opportunity to repurchase
it within a year or two.
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- Eventually, this was my option.
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- [Narrator] He raised
his three kids here,
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and imagined he'd stay in the house
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until he retired from his
job as a physical therapist.
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Then the pandemic hit.
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He says he lost half his income,
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as he could no longer
make home health visits.
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- I got a forbearance on the house.
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So I basically had a year
that I didn't make a payment.
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- [Narrator] During the same period,
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he also went through a divorce,
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and started paying child support.
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- I think honestly, if
the pandemic didn't come,
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I could have made it.
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- [Narrator] Marburger says
he fell deeper into debt,
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and his credit score plunged.
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Even though he had temporary
forbearance protection,
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which allowed him to skip
payments for up to a year,
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and make them up later, he
worried he could lose the home.
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- I was very apprehensive about doing it,
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but it was kind of, I was
coming to the end of my options
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deciding what am I gonna do?
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- [Narrator] The company
Marburger found, EasyKnock,
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was originally conceived
to allow homeowners
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to start cashing out their
homes when the market was hot,
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or when an expense arose.
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But during the pandemic,
EasyKnock says it turned its focus
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on distressed homeowners,
who needed access
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to quick cash to pay off debt.
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Last summer, it raised $25
million from venture investors,
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adding to the hundreds of millions of debt
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it had already raised
according to Crunchbase.
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In Texas alone, it's purchased
more than a hundred homes
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over the past two years,
according to public records.
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- We've grown in the triple digits
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and the percentage terms
over the last year.
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We've bought north of $220
million worth of homes,
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and our average home is
pretty much in line with
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the national average,
which is around $280,000.
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- [Announcer] EasyKnock has a
new path to financial freedom.
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It's not a loan.
- CEO Jarred Kessler
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says the company decided
to focus on sale leasebacks
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to offer homeowners with bad credit
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a way to take cash out of their house.
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- [Announcer] All you have
to pay is monthly rent.
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- If people wonder if
we're the lost and found,
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and we're the destination of last resort,
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the answer is absolutely not.
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People can sell their home.
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That's an easy solution for people.
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If you want to stay in your
home, and you want the cash out,
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and you want to be treated with respect,
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we're the best choice.
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- [Narrator] For Marburger,
the sale-leaseback
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was both a last resort, and a lifeline
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to pay off his growing debt.
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EasyKnock paid $182,000
for Marburger's house,
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which it valued at $315,000.
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That paid off his mortgage
balance of $119,000,
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including a roughly $58,000
lien from years earlier,
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and gave him $30,000
cash to pay off his debt.
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EasyKnock took us $7,800 processing fee,
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and is collecting $1,600 in monthly rent.
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In 12 to 16 months,
Marburger has the option
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to buy back the house for $187,000.
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- The house was about four years away
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from being totally paid
off before the pandemic.
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So it's like,
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(groans)
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I just needed four more years, man.
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And, but you know, it
doesn't always work out
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the way that you want it to.
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- [Narrator] Millions of Americans
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are in a similar situation as Marburger.
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About 2.2 million homeowners
are currently in forbearance,
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according to the New York
Federal Reserve Bank.
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Serious mortgage delinquencies,
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those more than 90 days late,
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have quintupled since the
start of the pandemic,
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according to mortgage data
provider, Black Knight.
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Currently, federal and local
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pandemic restrictions on foreclosures
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are protecting some homeowners
from being kicked out.
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But Ira Rheingold, with
the National Association
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of Consumer Advocates, is
worried about what happens
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when those protections run out.
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He remembers seeing programs
like sale-leasebacks
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during the housing crisis.
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- As somebody who's done
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consumer protection for a long time,
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where people are harmed the
most is when they're desperate.
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When they're scared,
and they're desperate,
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and they're afraid of losing their home,
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losing something, right?
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They're afraid of going into bankruptcy.
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- [Narrator] Rheingold says he understands
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why sale-leasebacks are appealing
for struggling homeowners.
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But he thinks they're giving
up too much for quick cash.
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And he says in his experience,
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rarely can distressed homeowners
buy their houses back.
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- I understand the short-term
benefit of peace of mind.
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The short-term benefit
of not worried about
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being homeless in a year.
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But you're giving up
your long-term stability.
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You're giving up all of the
equity that you may have
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earned in your home over these years.
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And if you want generational wealth,
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if it's something that you
want your kids to have someday,
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or if it's a place that you want to
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live for the next 30 years,
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you're giving all of that up,
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and you're selling it really low.
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- [Narrator] Kessler
says that at this point,
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about a quarter of EasyKnock customers
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have bought back their homes.
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Morgan Stanley analysts say
they expect sale-leasebacks
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to continue to grow because of the robust
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single family rental market,
especially for retirees
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looking to tap into their home equity.
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They estimate there
could be a million homes
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sold through sale-leasebacks
in the next five to 10 years.
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Invitation Homes, the country's
largest home rental company,
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says it is planning a
sale-leaseback program in the fall
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as another channel to
add to it's 80,000 homes,
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though it's in very early stages.
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- There's no street lights,
it's just poles and,
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you know, unless you're
really kind of looking for it,
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you'll drive right by it,
and not even think twice.
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- [Narrator] At this point,
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Marburger says he has no regrets.
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- If you don't pay rent, they're
gonna come take your house.
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It's not a nonprofit organization.
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They're investors, I mean, they
gotta make their money too.
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Just like all of us do.
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- [Narrator] But he's still optimistic
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that he'll be able to buy back his house
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at the end of his 16 month contract.
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- I guess honestly the
best way to put it is,
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I'm still hanging on to a lot of memories.
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I'm not really ready to give them up yet.
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I'm not ready to start that chapter.
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