From: facemire@Software.ORG (Jeffrey Facemire)
Subject: Shared Equity
Reply-To: facemire@Software.ORG
Organization: Software Productivity Consortium, Herndon, Virginia
Distribution: usa
Date: Fri, 14 Aug 1992 18:24:28 GMT

I have a problem and a proposed solution, and I'd like your opinion on this...

THE PROBLEM:	I am one of those LUCKY folks who own a house in Texas :-(.  
		Several times we have attempted to sell the property and currently
		it is listing for about $15K less than we bought it for.  For
		about 5 years, we have been renting the property because we didn't
		see any equitable way of selling it.

THE SOLUTION?:	A financial advisor told my wife that we should investigate
		a "shared equity" arrangement.  As she understood it, shared
		equity meant something like the following:

		o We let the other party to the shared equity arrangement move
		  into the property for NO MONEY DOWN.

		o They would assume ALL payments (principle/interest, taxes, ins.)
		  and would maintain all upkeep of the property - including repairs.

		o They would receive all of the income tax deductions of the mortgage
		  interest and etc. since they are making the payments.

		o We would sell the property in 5 years, AND we would get our original
		  equity back and then we'd split any additional profits 50%-50% with
		  the other shared equity partner.

This appears to be a nice solution in today's marketplace where sellers (like myself)
cannot lower the price of the house sufficiently to attract buyers, and where 
wanna-be buyers might be faced with not having enough currently liquidity due to
the recession to afford a large down payment.  The benefits seems to include:

o We (the current owners) would essentially obtain some relief to having to make
  payments and taking a loss on the property.

o They would get into a property for 5 years for nothing down, and then if they really
  want the place can purchase it outright from us after 5 years.

o In the end, we would get our original equity out (which right now, we can't) plus
  50% of any additional profits, and they would get the other 50% of the additional
  profits for relieving our debt from us for 5 years.

NOW, some questions...

1)  The loan on this property is not an assumable loan.  So, what is the difference
    between this arrangement and a regular assumable loan?  Does all of this have to
    be coordinated through a mortgage company so that the interest and taxes are
    accurately recorded for the "other party" and not to my wife and I?

2)  OR, is this essentially an arrangement between me and "the other party" where
    they would pay us and then we would turn around and pay our mortgage?  This is,
    of course, assuming that legal paperwork is drafted between the other party and
    I regarding the transfer of tax and interest benefit (...can you do this???...).

3)  How do we establish the basis for the value of the house new?

4)  What happens if they default?

5)  How should we go about finding an interested "other party"?  I'm assuming that
    a typical real estate agent wouldn't be interested in this arrangement at all,
    since it looks like they wouldn't get their commission.  Are there agents that
    would handle such a transaction?  If so, how would they get paid and how much?

Any help on all of this would be greatly appreciated.  It sounds viable, but I'm
always a skeptic.

Thanks.

Jeff Facemire
facemire@software.org



Newsgroups: misc.invest.real-estate