Equity Sharing – The New Real Estate Alternative to Short Sale, Bankruptcy and Retirement

Due to the recent drop in home values ​​across the country, millions of homeowners seem to be in a big dilemma. Selling a home that is worth less than the balance on the mortgage loan is forcing home sellers to make tough decisions. Do they sell at market prices and pay the difference in cash to the lender? Is a short sale or bankruptcy a cure or do they make things worse? And what about moving away from home and debt? What are the chances of getting another home?

For some, listening to a real estate agent suggest using personal funds to sell a home at a loss is like listening to fingernails scratching on a blackboard. No home seller wants to hear that. Many resort to trying to negotiate a short sale with their lender; that is, the property is sold for less than what is owed with bank approval rather than a foreclosure scenario. Sounds good on paper, but most lenders don’t approve short sales, and even if they do, a short sale can have a negative impact on a good credit score. And with bankruptcy or departure, credit is definitely destroyed along with the ability to qualify for a home loan for years to come.

Every home seller who is upside down with their mortgage faces a multitude of challenges; or so they think What they don’t realize is that there is a very simple solution that has been around for hundreds of years in times of easy credit or no credit. Letting someone else take over the mortgage payment has always been a valuable option for homebuyers and sellers in the past because it easily solves the problem of transferring property rights when money is tight and the economy is down.

But because home values ​​have fallen so dramatically in the last five years, some homebuyers may not want to inherit a mortgage that is so high on the value of a home. From a home seller’s perspective, selling a home to a total stranger where the loan balance isn’t attractive, worrying that the new owner will walk away when the going gets tough is a very real possibility. The seller of the house could be forced to foreclose on the new owner while he ruins his own credit in the process by late mortgage payments.

A different “take charge” approach can be used to mitigate any of the above concerns. Sharing the equity can provide relief and security to both the seller and the buyer of the home. Remember that real estate values ​​are cyclical. They go down but always come back up during good times. If property values ​​are weak today, we will certainly experience a boom tomorrow. Stock deals can weather the storm until residential real estate values ​​turn a property into a profitable investment.

This is how a share of capital can produce tremendous results in any economy.

1. The seller of the house places his title in a special account similar to an escrow without transfer to the buyer of the house.

2. Using a very special “co-beneficiary” agreement, the home seller and home buyer treat the property like a commercial real estate venture and both become equity “partners.”

3. The homebuyer makes a mutually agreed upon “contribution” of money to this arrangement and, as occupant, is treated as a property manager with all rights of home ownership and financial rewards and responsibilities assumed by a actual owner. only on a “rent to own” basis.

4. Over time, as the property increases in value and when the property is sold, the home seller and home buyer can equally share the proceeds from the profitable sale of the property or the property manager Resident can purchase property at fair market value less equity.

Time is the great healer in a poor real estate market and a share distribution agreement is a perfect remedy when time is needed to recover. If it takes more time for the property’s value to rise above the balance of the mortgage loan, so be it. Equity sharing is a great tool for a homeowner because he or she can find someone to take over a payment, even if more is owed on the loan than the home is worth. It’s also a great way for someone with a good job but bad credit to get her dream home without having to qualify. Sharing shares is safe for all parties and is a perfect solution for moving real estate in a down economy.