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From Hefner's Mansion To Your Neighborhood: How Sell And Stay Can Work For You

Forbes Biz Council
POST WRITTEN BY
Jarred Kessler

Hugh Hefner, the founder of Playboy Enterprises, recently passed away at the age of 91, but he made a big decision about his home over a year before his passing. Everyone has heard tell of the Playboy Mansion: the women, the wild parties, the lavishness. If you don’t have at least a little intel on the mansion itself and the activities reported to have taken place within its garden walls, you’ve likely been living under a rock.

Mr. Hefner’s decision about his famed home had been to sell it. Though Hef lived out his days in the Playboy Mansion, he didn’t actually own it anymore. He opted to participate in a residential sale leaseback agreement with Daren Metropoulos and sold the home for $100 million with the condition that Mr. Hefner be allowed to live out his days in his own home for the lease price of $1 million per year.

Sell And Stay: What’s The Deal?

The "sell and stay" arrangement between Hefner and Metropoulos is known as a residential sale leaseback and is a pretty new concept in real estate. On a large scale, it’s never been done before, but it’s on the horizon — perhaps even coming to a city near you.

Who Can Benefit From A Sell And Stay?

You don’t need to be a mega-rich media mogul to qualify for a sell-and-stay agreement. In fact, people who own reasonably priced homes in the $100K–$250K range also qualify. These deals are for regular, everyday people.

People who are considering a home equity loan to pull equity out of their home, or those who have been turned down for a home equity loan, might benefit from sell and stay. It would allow them to pocket the equity they've built in their home minus modest fees and then rent their home from the new owner — giving them time to determine what their next step will be.

It's also great for people 62 or over who are considering a reverse mortgage, where there are some pitfalls. Federal guidelines, while allowing for the home to stay in possession of the homeowner once the mortgage is paid off, do not allow for the retrieval of all of the equity built up in the home. Particularly for retirees who don’t mind what happens to their home after they’re gone, the bigger equity payout of sell and stay might be more beneficial.

Sell and stay also means that the homeowner is no longer responsible for many of the fees associated with owning a home. It might be ideal for homeowners who are simply fed up with the monetary ups and downs that inevitably come with owning a home. It’s great for people who are looking for more predictable expenses but have good reason not to move (i.e., maintaining stability for kids, ill-prepared for or disinterested in facing the challenges of selling a home traditionally).

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Now, residential sale leaseback certainly isn’t for everyone. If the sentimental value you have wrapped up in your home means more to you than your equity, you probably want to opt out of this sort of real estate contract. For instance, if your home has been in your family for generations and it’d hurt more than you gain to see it pass into new hands, sell and stay might not be your best option.

Residential Sale Leaseback For Average Folks

Essentially, this type of program is for homeowners with modest homes who want out from under their mortgage for whatever reason. If it’s time to pull up stakes on your mortgage, but not your current location, sell and stay could be a great option for you.