Equity sharing is a relatively new concept on financing a home. Basically it is a meeting of an investor who wants to put his or her money in real estate and a buyer who wants to purchase a home. The investor puts up a sizeable amount of money for the home purchase. The investor does not live in the home. The home buyer occupies the property and pays all the expenses.
Investors can be relatives, the home seller, or just people who want to put their money in a real estate investment. Usually, the investor is named on the title of the property, but not on the mortgage loan, because being on the loan would affect the investor’s ability to invest in other properties.
The central feature of an equity sharing agreement is the legal contract between the two parties. That contract describes payback terms, which party gets tax deductions, and all the other financial aspects that make this a good deal for both investor and home buyer. It is crucial that an experienced real estate attorney draft this agreement. There are several tax implications that must be determined by someone who has experience with this type of home financing.
For the buyer, this is commonly an arrangement where the buyer must stay in the home for a five-year period. The buyer also must be willing to consult with the investor before making major renovations to the property. For the investor, his or her money is tied up for the same five-year period. The investor must trust that the buyer will keep up the property and continue to make payments. For both buyer and investor there will be compromises.
While this has not caught on in all of the country it probably will. For the best information on this concept go to www.HomeEquity Share.com. Home Equity Share is a California organization that matches buyers with investors. Its website is very informative.