21st Century Sharecropping

Real Estate Education Training:

Over the past several weeks I have participated in a lot of "around the water cooler" discussions regarding the state of our Real Estate industry.  We have discussed the possible impact of Eminent Domain, Bulk Sales and so many other situations that make our industry more or less attractive.

I made a remark that the offer by those willing to repossess and rent back to the former owner the home was an example of an old Southern tradition known as "Sharecropping" retold to me and other family members.  Often used in the South, this occupancy was mostly beneficial to the landlord.  Minorities in particular worked the land and supposedly shared in the crop, profits, etc.  My Grandfather talked about our family's experience in Kemper County, Mississippi with sharecropping.  He used to mention how most sharecroppers tilled the soil and improved the crop out put because it meant a better chance of the sharecropper getting something out of the arrangement.  The bigger the sharecropper's family the more hands to work the land, etc.  Bigger families also meant more potential debt for the sharecropper and a bigger bill for seed and other needs from the sometimes landlord owned store. I suggested that from my Grandfathers stories that sharecropping worked great for the landlord but often left the hard working family with little benefit and a likely debt beyond the returns from the crop.

This caused a few of my friends to question the alternative of just evicting the former owner and leaving them with little or no prospect for regaining their former home.  One suggested that the renting back of the home for up to 3 or more years allowed the former owner to have hope of one day getting their home back when they regain a better credit standing, etc.  They also suggested that the former owner would not have to move their belongings and could stay in the home, save money, improve their credit and then buy back the home, etc.

One of my many concerns raised was whether there would be an enforceable lease/option contract or just a month to month rental agreement?  Would there be a reasonable repurchase price spelled out in that contract allowing for a fair profit to the landlord and not further damaging the former owner/tenant?  Would a licensed real estate practitioner prepare and represent the parties in this arrangement?  Would any of the rent payments go towards the repurchase price?

I am comfortable with the landlord making a profit but I would worry if the repurchase price, terms, etc. were not spelled out up front in the written agreement.  I would also prefer seeing a licensed real estate practitioner on board from the very beginning to make sure that this arrangement does not end up leaving the former owner/tenant out in the cold anyway.

We all felt the pain of the recent economic difficulties.  Those who have lost and are in the process of losing their homes have truly been impacted.