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As reported by unofficial sources REX & Co. will discontinue operations.  The REX Agreement was filling an important need in the market and will be missed. Some of the funding for the REX Agreement was provided by AIG, the insurance giant, that is limping into infamy as I write this report. 40 talented and hard working individuals will be out of work shortly.  I am mad as heck that the leaders of industry and our county have let us down.

Please blog in as we want to know how you feel about this travesty.

Warm Regards,

David H. Schwartz

Equity Options USA (877) 777-4727

KBC, the parent of EquityKey is communicating its strong position during these turbulent financial months with a positive message.  The commitments EquityKey makes are  long term that can last up to 50 years and reflects the core long-term philosophy of KBC.

EquityKey will be excellent “Partners In Appreciation”TM

Press release
Regulated information*
8 October 2008 (during trading hours)
KBC stresses its strong position and strategy
Given the recent turbulence on the markets, André Bergen, KBC Group CEO, wishes to clarify the group’s position and strategy. Indeed, there are fundamental reasons supporting the group’s solidity, reasons that have already been highlighted and confirmed by all financial analysts, without exception.
1. KBC has strong liquidity and solid solvency levels
‘KBC is highly solvent. With a Tier-1 ratio of more than 9%, it is one of the most solvent banks. Moreover, the group has strong liquidity levels (i.e. it has more deposits than loans), making it much less dependent on the interbank market to finance its operations. KBC also has a large buffer of securities that it can use, if necessary, to mobilise funds from the ECB. To date, this buffer has been left untouched.’
2. KBC is supported by reference shareholders who think long term
‘The majority of KBC shares are held by stable shareholders who believe in our long-term strategy and who have supported the group through thick and thin for decades.’
3. KBC’s corporate strategy is clear and focused
‘KBC is a bancassurer that focuses primarily on retail and SME customers and that targets growth markets in Central and Eastern Europe, where the credit crisis is having little or no impact at the moment”. KBC is present mainly in those Central European countries that are in relatively good macroeconomic shape. As these economies are showing no sign of overheating they are also less vulnerable.
No problems have arisen in relation to funding the subsidiaries, either. Throughout the group, even more attention than before is being paid to ensuring that assets and liabilities are correctly balanced.
4. KBC is a company that has a traditionally conservative approach to its operations”
“In recent years, KBC has consistently adopted a rather conservative approach to both acquisitions and investments.’
5. KBC endeavours to communicate as transparently as possible
KBC is a fundamental supporter of open and transparent communication, even in difficult circumstances and when the market is driven by rumour and emotion. KBC endeavours to respond quickly and accurately to questions from all its stakeholders. ‘When the crisis erupted last year, KBC was one of the first financial institutions to disclose its exposure to CDOs. KBC has regularly published details of the write-downs on the CDO portfolio during the past twelve months and will continue to release details of any temporary negative mark-to-market write-downs going forward.’
KBC Group NV
Havenlaan 2 – 1080 Brussels
Viviane Huybrecht:
Head of Group Communication and Press Office/Spokesperson
Tel. + 32 2 429 85 45
KBC’s press releases are available at www.kbc.com. 1/1
Press Office
Tel + 32 2 429 65 01
*This press release contains information provided in compliance with the European transparency
Fax +32 2 429 81 60
E-mail: pressofficekbc@kbc.be legislation for listed companies.

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We are not offering tax advice. You must seek advice from an independent tax advisor and your circumstances are unique to you. 

The tax treatment of options and forward sales contracts is well established in tax code, revenue rulings and case law. You will find a very favorable environment exists for these “types” of agreements. 

See one comment that was blogged by MG:

To answer the IRS question, if it acts like other types of options, the true value is not realized until the position is closed, and that’s when taxing takes place. I’m not an accountant or lawyer but that’s how the other options I deal with work. Seek tax and legal advice before trusting my description.

I buy a house today for $300,000 cash and immediately sell an “option” (Rex agreement) on 1/3 the future value of my house for $100,000 cash (open the option position). 15 years from today, I sell my house for $600,000, of which, I get to keep $400,000 (2/3 value and $100,000 profit), and Rex gets $200,000, (1/3 value and $100,000 profit).

-300,000 buy house
+100,000 sell option
+600,000 sell house
-200,000 Buy option
net 200,000 gain

-100,000 sell option
+200,000 sell option
net 100,000 gain

This is where it gets interesting, technically the option is never exercised because Rex never actually takes possession of the underlying instrument. In other words, all Rex is doing is buying an option on 1/3 value for $100,000 and then selling the option back to the “owner” at closing for $200,000. The $300,000 profit made on the house may be taxable to the “owner” as capital gains, even though the “owner” only gets to keep $100,000 of that profit because he must buy back the option. That said, they may be able to write off the $100,000 of capitol loss on the option to Rex. This is where a tax accountant or tax lawyer is needed to hash out the details.

Usually, options are looked at as a completely separate instrument from the underlying instrument, so the profit made on the sale of the house is completely separate from the profit made on the sale of the option. In the example, the option is sold for $100,000 today and bought back for $200,000 when the house is sold. The house is bought for $300,000 today and sold for $600,000 15 years later. That means for the owner, there is a $300,000 capital gain on the house being offset with a $100,000 capitol loss on the option.

I’m really curious how a tax accountant or lawyer would see this and what the current law is. Keep in mind, If there is a tax benefit to this type of program, the law could change during the agreement and wipe out any and all tax benefits with no recourse for the owner. Posted by MG | February 26, 2008 11:11 PM 

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One Response to “EquityKey and Shared Risk”

Marvin Says:
Here’s a question on the EquityKey program: assume my wife and I both qualify and we give up all the appreciation from date of contract. I will likely precede my wife: at that point in time must the house be sold, or could it wait until she passes, perhaps years later? Please advise.

BrokerDave Says:
Dear Marvin,

To address your question, I will point you to sections 4 and 5 of the Client Disclosure provided by EquityKey:

4. When can the option be exercised?
Our right to exercise the option to purchase your property only arises upon the death of the last
surviving homeowner involved in our transaction or your breach of the agreement (that you
don’t cure or fix), whichever occurs first. We will proceed with closing on the purchase of your
property within six months of exercising the option, unless there are claims or disputes that
delay the closing. (A breach of obligation here is outlined in section 8 of the attached Option Agreement)
They would include failure to maintain mortgage, tax and insurance payments or the condition of property, etc…

5. You (or your estate) have the right to keep the property if you don’t want us to buy it.
If we decide to exercise our option, before we proceed with purchasing your property, you (or if
applicable, your estate) have the right to keep the property by paying us the amount we are
entitled to under our agreement. The amount we are entitled to will equal the applicable Early
Termination Charge for a breach of the agreement that occurs within the first ten years, or our
share of the appreciation if there hasn’t been a breach or it’s past ten years from the date of the
agreement, plus any amounts we have paid on your behalf in accordance with our agreement.

In the paraventricular of the life insurance industry it would be “second to die” before the option may be exercised. If you sell or default the option may be accelerated too.

Of the three companies offering “equity sharing” EquityKey, NestWorth and REX & Co. all have unique terms and conditions that must be individually reviewed. This information is subject to change without notice.

Warm Regards,

David H. Schwartz

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Graham Williams, President of NestWorth, Inc. announced plans to expand the current markets they service in California to include two additional markets, Portland and Seattle. 

Both EquityKey and REX & Co. are currently servicing these markets. Each company offers programs complimenting different layers of the market so the entry of NestWorth adds more opportunity for seniors to receive cash now for the future equity in their homes.

More information on NestWorth:

For senior homeowners who want to access the net worth in their home, NestWorth is an attractive alternative to selling, downsizing, traditional home financing or reverse mortgages. NestWorth provides the power of choice to senior homeowners by providing substantial monthly payments without debt or interest. NestWorth also allows seniors to participate in the increase in the value of their homes and remain in their homes for the rest of their lives.

Please contact Equity Options USA for additional information. 

Warm Regards,

David H Schwartz
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EquityKey FAQ

Equity Options USA (877) 777-4727

Equitykey Frequently Asked Questions with graphics.  Please call for more information.

Warm Regards,


David H. Schwartz
Who is EquityKey?EquityKey is a new kind of real estate investment company that helps people 65 to 85 unlock the wealth in their homes. EquityKey offers qualified homeowners a real estate option, which pays cash today in exchange for a share of the future appreciation of their property. The EquityKey option is not a loan. There are no monthly payments or interest charges. Clients keep their existing equity, and EquityKey takes the risk, betting that the money it pays to clients today will be recouped through future long-term growth in property values. By taking this risk EquityKey essentially allows clients to exchange the possibility of appreciation in the future for the certainty of cash today. 

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 Equitykey Frequently Asked Questions



Who is EquityKey?

EquityKey is a new kind of real estate investment company that helps people 65 to 85 unlock the wealth in their homes. EquityKey offers qualified homeowners a real estate option, which pays cash today in exchange for a share of the future appreciation of their property. The EquityKey option is not a loan. There are no monthly payments or interest charges. Clients keep their existing equity, and EquityKey takes the risk, betting that the money it pays to clients today will be recouped through future long-term growth in property values. By taking this risk EquityKey essentially allows clients to exchange the possibility of appreciation in the future for the certainty of cash today.

How did this start?

The EquityKey real estate option was created in 2005 by a group of certified financial planners whose inspiration came from their own clients. Many of those clients had significant assets tied up in rapidly appreciating real estate, and wanted a better way to access those assets.
The result was the EquityKey real estate option—a new way to access property values without loans, monthly payments or interest charges. Instead of taking existing equity out of a property, EquityKey focuses on the property’s potential future value. With this patent-pending approach, everybody wins—property owners receive cash today, and EquityKey shares in the growth of tomorrow.
Today, EquityKey is backed by KBC Bank, one of the largest financial institutions in Europe. The EquityKey option is available through certified real estate brokers in several states.

Tell me more about the bank.

In October of 2006, EquityKey was purchased by KBC Financial Products, a U.S. unit of the $500 billion* KBC Banking Group. With 11 million customers in 30 countries and more than 51,000 employees, KBC caters mainly to retail and private banking customers.

Why would I do this?

By taking advantage of the EquityKey real estate option, homeowners can access cash without going into debt through a loan or tapping into existing equity. You can use the EquityKey option as a tool to either meet short-term needs or for the purpose of longer-term estate planning.

How can I use the money?

You can put the money you receive to work in a variety of ways today, like diversifying your investment portfolio, retiring debt, funding a grandchild’s education, or making charitable contributions that you can witness and enjoy during your active years. The choices are endless.

How does it work?

EquityKey is making an investment in your property. In exchange for an upfront payment, EquityKey receives the right to buy the property at a later date, which is why this is known as an “option.” Through the option, EquityKey shares with you any appreciation. If one homeowner qualifies, EquityKey typically pays 10% to15% of the current value of the property. If the property has increased in value when EquityKey exercises the option and purchases the property, the increase in value is equally divided between you and EquityKey.

What if there are two qualified homeowners?

If there are two qualified homeowners, and you both wish to participate, together you could typically receive 20% to 30% of the property’s current value. In exchange, EquityKey will receive 100% of the future appreciation. You still keep all of your existing equity—EquityKey’s only interest is the future growth in property value, if any, from the time the option is purchased.

What’s in it for EquityKey?

EquityKey believes its real estate option fosters a win-win relationship. Because EquityKey focuses on long-term value, it expects properties will appreciate more often than not. At the same time, many clients are less interested in long-term gains than short-term goals. They would rather see a return on their investment today, so they can put the money to work in other ways. In this sense, EquityKey truly is your partner in appreciation.

How are home values determined?

EquityKey pays for the cost of two appraisals. The two appraisals are averaged together to determine the home’s initial appraised value. If you don’t agree with the appraised value, you have the right to pay for a third appraisal. The average of the two highest appraisals will be used to establish the initial value of the home. The same process is used to determine the value of the home at the end of the transaction, except you pay for the appraisals. These final appraisals are part of the acquisition cost if the property is purchased by EquityKey.

What kind of property qualifies?

Primary residences, second homes, and commercial properties can all qualify. Homes must meet or exceed minimum value requirements, which are specific to each state. Homes cannot have a loan-to-value ratio greater than 80% when one owner participates, or 70% if two participate.

How do I qualify for the EquityKey option?

To qualify for the EquityKey real estate option, you must be between 65 and 85 years old, and satisfy health standards required by life insurance carriers.

Why are there health requirements?

EquityKey buys a life insurance policy on the homeowner as part of every transaction. One of the critical insurance company underwriting requirements is the health of the insured. Therefore, in order to qualify, you must satisfy health standards of the insurance company.

Why does EquityKey purchase life insurance?

EquityKey is making a long-term real estate investment. It’s designed to last a homeowner’s lifetime. If a client unexpectedly passes away shortly after entering into a transaction, the property will not have had time to appreciate, and the option will expire. To guard against this risk, EquityKey buys a life insurance policy to cover its potential loss in the event of an unexpected death. Additionally, the life insurance policy gives EquityKey the necessary funds to buy the home when the owner passes away, ensuring a smooth estate settlement process. In that sense, the EquityKey option not only gives homeowners the financial freedom to make the most of their active years—it also eliminates uncertainties about what will happen after their passing. EquityKey pays 100% of the costs associated with these insurance policies. Homeowners don’t pay anything for the policy, and the proceeds of the policy are paid to EquityKey.

What are some of my requirements?

Because the EquityKey real estate option is an investment in your home, you must continue to care for the property. This includes maintaining the condition of the home, making mortgage and property tax payments on time, keeping the home insured at its full replacement value, and other responsibilities as detailed in the agreement.

How long does it take to qualify?

A typical transaction takes 90 to120 days to complete. It usually takes around 30 days to gather medical information from clients and obtain medical records. Once this step is complete, it takes about 30 more days to complete medical and financial underwriting, including property appraisals. In the last 30 days or so, EquityKey obtains coverage from the insurance carriers, finalizes the agreement and funds the client, who typically receives 10% to 15% of their appraised home value.

What are the closing costs?

Unlike a reverse mortgage or other home loan, which can have hefty origination and closing costs, the EquityKey option has a one-time-only $300 application fee. The entire fee is refunded if for some reason you don’t qualify, or when your transaction is funded.

Are there other costs?

There can be other costs associated with the EquityKey option. For example, if you decide to move without transferring the option to a new property, an early termination charge may apply. The amount of the early termination charge is detailed in the EquityKey option agreement. After 10 years, there is no early termination charge.
At the time the option is exercised and the property is purchased, EquityKey withholds an acquisition cost, which is similar to the fee any broker would charge to sell your home. This cost—which is capped at 8% of the property’s final, appraised value—covers such expenses as hiring a real estate agent and listing the home. Once the property is sold, EquityKey will reimburse the difference between the amount withheld and the actual cost of selling the home.
As with any transaction, it is important to read and understand the contract. EquityKey encourages you to review the real estate option agreement with your advisors to make sure all costs and terms are completely understood. We also encourage you to include family members in your decision, so the transaction is understood by everyone involved.

Can I refinance?

You can refinance existing loans, or even take out new loans on the property, though new loans must be approved by EquityKey. All approved loans must have a combined loan value that is less than 80% of your share of the home’s value.

Can I move?

There’s no requirement that you live in the property. As long as you maintain ownership and the condition of the property, you can have another primary address, rent out the property, do whatever you want—and continue to share the appreciation with EquityKey until you sell or pass away.

What if I want to sell the home?

The EquityKey option is intended to be a lifetime option. However, if you want to sell your home, you can ask EquityKey to transfer the option to the new property. This is subject to EquityKey’s approval, and a new agreement with new terms will be needed. But if you are looking to move, you can take the EquityKey option with you.

What if I can’t transfer the option?

If the option can’t be transferred—for example, if the new property is not eligible under EquityKey’s guidelines—you can still sell your home. EquityKey has the first right to purchase the property. If the sale occurs within the first 10 years of the transaction, an early termination charge will also apply.

What happens if I pass away?

If the qualified EquityKey client passes away, the surviving homeowner has three choices. They can continue to own the property and share the appreciation with EquityKey. They can offer EquityKey the right to acquire the property. Or they can choose to pay EquityKey its share of the appreciation, and terminate the agreement. Upon payment, EquityKey will release any interest it has in the property.

Does EquityKey always purchase the property?

In most cases, EquityKey will be the purchaser of the home upon the client’s death or decision to sell. In some cases, specifically very depressed real estate markets, EquityKey may choose not to exercise our option to purchase the property, and the agreement will end.

What if my family wants the home?

If your heirs or estate wish to keep the property in the family, they can do so by paying EquityKey the amount it is entitled to under the agreement.

* As of September 2008.




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The EquityKey program can be the beginning of a long term relationship that could last as long as 50 years.  There will be many questions that need answering before a commitment can be considered. Please contact me to answer these questions.

Warm Regards,

David H Schwartz

EquityKey has taken the high road as regards:

  • Transfer (1031 exchange)
  • Sale of the Property
  • Refinancing
  • Death
  • Children
  • Termination








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Equitykey can be your partner in growth by providing “debt-free cash” in exchange for a percentage of the future appreciation of your property. The original equity in your property is yours to keep with EquityKey sharing only in the future appreciation, if any!

The program is subject to specific terms and conditions that we will be happy to review with you.  Please contact Equity Options USA (877) 777-4727 for more information.

EquityKey Information:

  • Your partner in growth

  • How much do you receive

  • What if your property appreciates

  • What if your property depreciates

  • Why does EquityKey take the risk

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The time-line for a deal with Equitykey runs for approximately 90 to 120 days. Each opportunity is “underwritten” by Equitykey taking into account your specif circumstance.  Ultimately the goal it to have an offer from EquityKey to purchase an option for a portion of your future equity. 

We assist and manage the process between EquityKey and you to accomplish this goal.  Please contact us to answer any questions.

Warm Regards,

David H. Schwartz

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Equitykey Commercial property can be used in the Equitykey option.  Various commercial properties are accepted:

  • Apartment buildings
  • Multi-family
  • Warehouses
  • Mixed-use commercial
  • Light industrial
  • Professional centers
  • Medical office
  • Office buildings
  • Office condominiums
  • Retail (shops?

Minimum property values must be at least $5M with the owner have at least a 33% interest. The option payment can be from 8% to 12%.

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EquityKey will consider:

  • Primary residence
  • Investment property
  • Second homes
  • Raw land (over $3m)
  • Commercial property (subject to requirements)

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Estate Planning for the jumbo estate can use EquityKey to fund the needed life insurance to complete the plan. We know that estates of this size have ready access to funds.  Often they can borrow from a family trust at reasonably low interest, say in the 4% range.  But despite the ready access to cash it is still a loan!  When EquityKey purchases a portion of your future equity cash enters the estate, possibly on a very favorable tax basis, that is not loan. The product serves the jumbo estate very well.  In fact this may be one of the most potent uses for EquityKey!

Please note that you must hire the appropriate professionals for advice and that tax treatments are unique to you.  We would welcome any questions.

Warm Regards,

David H. Schwartz

 Jumbo Estate use of the EquityKey product:

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EquityKey See the Video!

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Re: EquityKey: Unlocking the Future Value of Your Home TodayTM

Would you consider selling 50% of the future equity of your home, land or commercial real estate if we paid you cash…today? And, the current equity/value of your property will be yours to keep.  

EquityKey may purchase your future equity if you are a qualified owner.  The program is straight forward and is subject to applicable terms and conditions. 

How You Would Qualify: At least one owner must:

  • Be 65-85 years old
  • Owe less then 80% of the home’s value
  • Have at least one property value/equity worth $350K+
  • Be in good health (no Type 1 diabetes, no smokers, no recent bouts with cancer and no uncontrolled high blood pressure or severe cardiac issues.) 

   Who is EquityKey?

  • Owned by KBC Financial Products, a subsidiary of Belgium-based KBC bank NV
  • Managing an estimated 450 billion in assets, 11 million customers in 30 countries
  • Focused on working with private clients  

   What are the Benefits?

  • Each qualified owner can receive cash equal to 10-15% of the property value
  • No closing cost are involved – just a simple application fee (refundable if not qualified or when the program funds)
  • Funds are NOT a loan. (This is NOT a reverse mortgage)  

We will be happy to answer your questions regarding this opportunity.  Please contact David H. Schwartz, (877) 777-4727 or e-mail me using David@EquityOptionsUSA.com  

Warm Regards, 

David H. Schwartz
Click On Link To See Video =======================> EquityKey Introduction
EquityKey Introduction
Click On Link To See Video ======================> EquityKey How It Works? 
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EquityKey is currently doing business in:

Arizona, California, Connecticut, Florida, Massachusetts, Nevada, New Jersey, New York and Oregon. 

 They have plans to launch in:

Illinois, Maryland, Virginia, Washington and Washington DC.

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We are thrilled to be in the Florida and California markets.  The product offered by EquityKey will fill a need in both markets.  Consumers do not want to take on debt and would prefer selling the “future” equity in their home, land or commercial property to Equitykey.  We look froward to answering questions about the product.

Warm Regards,

David H. Schwartz
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 Published: July 6, 2007
A New Way to Tap Equity Without Going
Into Debt:
Homeowners Can Sell a Share of Future Appreciation
Bill and Elaine Nolan paid top dollar when they bought their Tiburon house a few years
ago at the height of real estate frenzy. Now, of course, the market is cooling rapidly.
So Bill Nolan, who deals with money all day long as a partner in an investment
management firm, wanted to diversify. He turned to a startup based on a new concept:
Let homeowners tap their equity without taking on debt.
Nolan contracted with Rex & Co. to receive $100,000 cash in exchange for a 10 percent
stake of the home’s future appreciation. When the Nolans sell their home, they’ll pay
Rex the $100,000 plus 10 percent of their home’s appreciation above its current value of
$2 million. For example, if the home sells for $2.5 million, the Nolans would pay Rex
$150,000 — the original $100,000, plus 10 percent of the $500,000 gain in value, or
$50,000. If the home were to depreciate, Rex would share in that loss as well.
(The Nolan house is atypical because of its high value; more typically, a $100,000 Rex
payment would be in exchange for a larger share of a house’s appreciation.)
“It was an interesting opportunity to take some cash out of the house and hedge against
any decline in home value,” said Bill Nolan, who plans to invest the money in his
business. “It was a way to hedge against the (real estate) market being flat or not
performing as well as the equity market; to pull money and put it into something else I
felt had a reasonable chance of outperforming the real estate market.”
San Francisco’s Rex & Co. (www.rexandco.com) — the name stands for Real Estate
Equity Exchange — bills itself as the first company offering a way to make home equity
liquid without incurring debt. It essentially buys a share of a home’s future
appreciation. Rex gives homeowners a large up-front cash payment — up to 15 percent
of a home’s value, topping out at $300,000 — in exchange for a share of the home’s future
change in value — up to 50 percent of its appreciation or depreciation.
No payments, no interest
When the home is sold, the homeowner returns the original investment to Rex plus the
agreed-upon share of appreciation. The homeowner does not pay interest and does not
make any payments until the sale.
“People, especially Baby Boomers, are sitting on a tremendous amount of equity,” said
Rex chief executive Thomas Sponholtz, a former Barclay’s executive who co-founded
the company with Ian Charles, formerly an investment banker at S.G. Cowen. “If you
take on debt to unlock that value, you’re paying to borrow your own money.”
Sponholtz said many potential customers will want cash to meet specific needs, such as
college tuition or retirement income.
He is quick to correct any reference to the Rex payment as a loan. The company prefers
the terms equity co-share or equity co-investment.
Another way homeowners can take money out of their house without making monthly
payments is through reverse mortgages, which are only available to people over age 62.
Reverse mortgages, unlike the Rex system, are a form of debt. They provide either a
lump-sum payment or regular monthly payments, and do not have to be repaid until
the homeowner dies, sells or moves out for longer than a year. The loans accrue interest
and come with hefty up-front fees.
Rex does not charge up-front fees, but the homeowner pays for standard real estate
services. In originating a Rex deal, the homeowner would pay for an appraisal, an
escrow fee to a title company and title insurance. The latter two are because the home’s
title would be amended to show Rex as having a lien against it. Rex offers some rebates
on those fees.
Homeowners referred to Rex through financial advisers or mortgage brokers might be
charged fees by those individuals, the company said. To discourage flipping, Rex
charges an early exit fee for properties that are sold within five years. The exit fee is 25
percent of the cash advance in the first year and declines by five percentage points a
year over the next five years. Homeowners can end their Rex arrangement at any time
by paying the company the original investment plus Rex’s agreed-upon share of the
home’s appreciation at that point (plus the early exit fee, if appropriate). The
appreciation would be determined by an independent appraiser.
Rules to qualify
Nolan said he might consider ending his Rex deal if Tiburon houses go down in value,
so that Rex would share in the loss on his home. “The beauty of it is that no one else can
‘call’ me on the option; I own the trigger point,” he said. “No one else decides, ‘This is an
opportune time, home prices have risen, we’ll call Mr. Nolan on our option to give us
our 10 percent.’ ”
Only certain properties qualify for a Rex deal: They must be owner-occupied, detached,
single-family homes. Condos, vacation homes and rental properties do not qualify.
Owners must have at least 25 percent of the home’s equity and must have good credit.
“We’re looking to invest in the typical house in the neighborhood — not castles,”
Sponholtz said. Rex will not buy shares in homes in the bottom 10 percent or top 10
percent by value in any given neighborhood.
Sponholtz said the company will do business in all metropolitan areas where it can get
comparative price data and will not exclude areas where the housing market is
struggling. But it will pay different prices for a share of future appreciation depending
on its assessment of individual markets and homes, he said. That means if you have a
well-maintained home in a desirable area, you’re likely to land a better deal with Rex.
Rex’s investors include AIG Financial Products Corp., part of insurance giant American
International Group; San Francisco investment firm Hellman & Friedman; and Royal
Bank of Scotland/Greenwich Capital.
Of the $21 trillion worth of residential real estate in the United States, $12 trillion is
owned outright by homeowners; the rest is debt owned by lenders. For most people,
their home is both their biggest asset and their biggest vehicle for saving. Many
financial experts warn consumers that they should diversify — taking money out of
their house and putting it in a financial product that will generate income, for example.
“Most people are over-invested in their home,” said Christopher Thornberg, principal at
Beacon Economics in Los Angeles. Selling “an equity stake in your home makes sense to
me. Taking money out of your house and putting it in some other type of investment
like stocks or bonds basically reduces the overall risk of your portfolio.”
Thornberg said he wondered why Rex is starting now “considering that equity will go
nowhere but down.” Many experts think the real estate market might not bottom out for
another year or two; Rex said that since it’s aiming for a five-year-plus horizon, the
immediate market is not a concern.
‘A certain pizzazz’
Rex operates in nine states: California, New Jersey, Virginia, Florida, Illinois,
Washington, Colorado, New York and North Carolina. It hopes to go nationwide within
a couple of years. It considers California its biggest market.
Tim Chrisman, who runs Los Angeles executive-search and planning firm Chrisman &
Co., did some work for Rex and said he was impressed by the concept. He ended up
investing in the company.
“It has a certain pizzazz about it,” said Chrisman, who is also chairman of the San
Francisco Home Loan Bank Board, one of 12 such federally sponsored banks. “What is
so novel about Rex, as the homeowner you can pull real dollars out of your home and
you don’t incur debt; that’s the significant factor. When you get a home equity loan or
pull out through (refinancing or reverse mortgages), you get the equity but you also
incur more debt.”
Chrisman said he could picture a scenario where Rex would turn its equity-sharing
agreements into securities and sell them to other investors, just as mortgages are now
routinely packaged and sold to Wall Street.
Meanwhile, obviously, Rex will not be generating cash flow for some time, because its
contracts encourage home buyers to stay put for at least five years.
Rex spokesman Wade Randlett said that is not an issue for the company. Rex’s
investors are seeking long-term returns and agree with the company’s philosophy that
the returns will ultimately be significant, he said.
While Randlett declined to say how much financing Rex has, he said: “We have
sufficient credit to originate thousands of these (deals) across the United States. If we
got to the point that the current credit facility was maximized, I am 100 percent
confident we’d be able to increase that credit facility.”
How Rex works
Here are potential ways a Rex deal might turn out, all based on the same premise: A
homeowner with a $750,000 house gets a $100,000 cash advance from Rex in exchange
for 50 percent of the future change in her home’s value. In all cases, the homeowner
would also pay third parties for real estate services such as appraisal, escrow fee and
title insurance, although some of those would be rebated by Rex.
Scenario 1: After five (or more) years, the homeowner sells the house for $900,000, a
$150,000 increase in value. The homeowner pays Rex $75,000 (half of the appreciation)
plus the original $100,000.
Scenario 2: After five years, the house sells for $675,000; it has lost $75,000 in equity. Rex
“owns” half of that, or a negative $37,500. The homeowner pays Rex $63,500 — the
original amount minus Rex’s loss.
Scenario 3: After five years, the home sells for $750,000. The homeowner pays Rex
$100,000, its original investment; Rex has neither made nor lost money on the deal.
Scenario 4: The homeowner decides to sell after just 11 months. The house sells for
$770,000. Rex is paid the original $100,000 plus $10,000 (half of the $20,000 appreciation)
plus an early exit fee of $25,000 (25 percent of Rex’s initial investment) for a total of
E-mail Carolyn Said at csaid@sfchronicle.com.
This article appeared on page C – 1 of the San Francisco Chronicle

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Tapping the Future Value of Your Home

Some retirees leverage home appreciation in advance

Posted August 25, 2008

Senior homeowners sometimes need to tap the value of their house to pay sudden expenses. Most ways to access home equity involve taking on debt. But several financial institutions offer a new alternative to often pricy reverse mortgages or other home loans.

Here’s how to decide if leveraging your home’s future appreciation is right for you.

Get to know the terms. EquityKey cofounder Jeff Nash gives an example of a house worth $1 million. The company will pay the property owner between $100,000 and $150,000 in cash to partner in the growth of the property. If that house grows to be worth $3 million in 20 years, $1 million of the appreciation will belong to EquityKey and the other $1 million to the owner. If the client passes away within 10 years of signing the agreement, EquityKey would use a life insurance policy it purchased on the homeowner to buy the home for $2 million. (The company can then sell the house for $3 million.) Should the heirs desire to keep it, EquityKey offers the right of first refusal to the family, Nash says. But they essentially would have to buy the $1 million share of the house EquityKey owns.

Gladys Tully, 72, got $106,000 from EquityKey in exchange for a 50 percent stake in the appreciation of her home in El Cajon, Calif. Tully, who sold her travel agency in 1994 and retired, used the money to pay down part of the principal of her mortgage and remodel her bedroom and bathroom, without giving up her passions: painting, the large garden and orchard on her property, and a hiking trip to Europe every year. “I’m able to continue the lifestyle that I want to live,” Tully says.

Dont move. If you plan to move soon after entering the agreement, you’ll have to pay back the money and may incur fees. Those who sell within 10 years must pay back the entire amount; if they sell within five years of the deal, they must pay an additional 5 percent. But otherwise, the cash leveraged is not a loan and does not need to be paid back. And unlike a reverse mortgage, there is no requirement that the homeowner live in the property, so commercial properties are eligible as well.

Location matters. You may be wondering who would bet on home appreciation right now when home values are famously falling. “We try to target states where we can do a little bit better,” says Nash. EquityKey real estate options are currently available for properties in Arizona, California, Connecticut, Florida, Massachusetts, New Jersey, New York, Oregon, and, for commercial properties only, Texas. The company plans to expand into Illinois, Maryland, Virginia, Washington state, and the District of Columbia this year. And EquityKey takes on only clients it deems to be insurable and who pass a credit check.

Shop around. Two other companies, REX & Co. and Grander Financial, also will pay you up to 10 to 15 percent of your home’s value for a stake in the future appreciation. They differ from EquityKey in that they impose no age limitations and require that the primary owner reside in the property. REX & Co. pays customers in two payments, one when the agreement is entered and one at the end of the agreement, typically when the home is sold. In some cases, homeowners may be required to repay if the home loses value.

Read the fine print. As with all financial transactions, experts advise caution. “We would not advise taking on a reverse mortgage or shared appreciation for something that is not a necessity,” says Gail Hillebrand, a senior attorney for the nonprofit Consumers Union. “For any kind of an arrangement involving your house, you need to look at the total cost and the total return. Find out if the future appreciation is forever or for some limited period of time and exactly what fees are charged.” A lawyer and an independent financial adviser can help you parse the terms of your individual agreement.

Appraise carefully. Homeowners should also make sure their property is fairly and accurately appraised. “You are transferring half of your future appreciation to another entity for a sum today,” says Barry Glassman, a senior vice president of the wealth management firm Cassaday & Co. in McLean, Va. “Have an attorney look over the details, and pay close attention to the appraised value.”

Consider heirs. You should also think twice about leveraging future appreciation of your home if you eventually plan to leave the property to heirs. Children who want to keep the house will have to essentially buy back the share at the new, appreciated value.

Jorge Saucedo, 66, a home builder and seller in the San Francisco Bay area who runs a rescue foundation for stray cats out of his 3,000-square-foot home in San Leandro, Calif., will share appreciation with EquityKey on two duplexes and his house. He used the money to pay down debt on all three properties. As for the possibility of leaving his property to heirs, Saucedo says, “Let them work on their own.”

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Today’s New York Times features an article specifically about EquityKey.  It’s a terrific article that terms EquityKey “particularly innovative”.  Some of the technicalities are inaccurate, but the piece overall is a good one.    See link below!!!

REAL ESTATE   | August 17, 2008
Mortgages:  Finding Cash in a Home

A new service essentially offers a cash advance on the home, in exchange for the owner’s promise to share in the home’s future appreciation…..

Finding Cash in a Home

The New York Times


Published: August 16, 2008

MANY older adults looking to extract cash from their homes have recently turned to reverse mortgages, rather than take on new monthly debt through second mortgages or home equity lines of credit. But these transactions can be expensive — closing costs can often run to $15,000 — and risky, since borrowers face big penalties if they move.

Now, financial institutions are starting to offer new alternatives to such loans. One particularly innovative idea is being offered by EquityKey, a San Diego-based company that is a division of KBC Bank, a financial services company with headquarters in Belgium. EquityKey’s service essentially offers a cash advance on the home, in exchange for the owner’s promise to share in the home’s future appreciation.

Owners 65 to 85 with good credit who live in homes valued above $400,000 (above $500,000 in New York and California) can receive a payment of up to 15 percent of a home’s equity. Those who move out within 10 years must pay back the entire amount — and 5 percent more if they move within the first five years.

If the house sells at any time after that, though, the customer or the estate pays EquityKey only if the home’s value has increased since the time of the payment. In that case, EquityKey receives half of the appreciation amount. If the homeowner dies within 10 years of signing the deal, the heirs owe nothing to EquityKey.

That is because the company takes out a life insurance policy on the client at the time of the transaction. “So, you need to be able to qualify for life insurance to do this,” said Jeff Nash, a founder of EquityKey. If that is the case, the transaction can yield significant benefits to those who are “house rich and cash poor,” he added.

Take, for example, the owner of a home appraised at $1 million. EquityKey conducts a credit check and otherwise evaluates the applicant’s financial ability to maintain the home. It also considers local market conditions in determining the likelihood that the home’s value will rise.

Assuming the applicant clears those hurdles, EquityKey writes the homeowner a check of up to $150,000 and refunds a $300 application fee. There are no closing costs. Mr. Nash said income and estate tax implications depend on each homeowner’s circumstances, but he said clients typically need not pay taxes until the home is sold.

Mr. Nash said a prospective client should speak with a financial planner before entering such a transaction. “If you have some reasonable likelihood of being forced to sell your home in the near term,” he said, “don’t do this deal.”

With its risk-sharing concept, EquityKey is similar to products recently introduced by Grander Financial and REX & Company — but neither of them imposes age restrictions. Grander Financial serves customers in New Jersey and Connecticut, but not New York.

REX & Company, which serves all three states, offers clients cash advances of up to 15 percent of the home’s value. But unlike EquityKey’s transactions, REX agreements require clients to repay part of the payment if the home loses value when it sells.

Michael Berman, REX’s chief executive, said the company had conducted about 175 transactions and disbursed about $20 million. The typical client, he said, is someone “who is very sophisticated financially.”

“They seem to really understand what they’re getting into, and know they’re choosing to forgo some of the change in value of their home for some good use of the money,” he added. “It’s definitely not an impulsive thing.”

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The Rex Agreement… Is It Worth It?

Posted by Noah Rosenblatt on June 4, 2007 at 8.39 AM

A: I want to discuss the article in yesterdays NY Times titled, “A New Way To Tap Home Equity”. Right away I thought, “perfect…another abusive lending tactic targeted for the uneducated that will result in tons of money lost before the product’s truly understood.” But then I wondered and thought more deeply about it; here is a loan product that claims to take on 50% of either the gain or LOSS on the property (based on the time of the transaction) as a term of giving you a loan right now? Is it worth it? The short answer is YES if you are bearish on housing and disciplined with investing and represents a sort of hedge against falling home values.

First lets understand the REX AGREEMENT and that it is only acceptable for single-family detached houses & average-higher credit scores. So, right now this is not an option for most Manhattan real estate owners; but it could be some day if the public sees a benefit in the product.


The REX Agreement is not a loan, but a real estate investment agreement in the form of a purchase option. It gives homeowners a portion of their home’s equity in cash today — in exchange for the right of REX & Co. to share in a specified percentage of the future increase or decrease in the home’s value. 

For the right to share in an agreed upon percentage of the future change in value of the home, REX & Co. pays the homeowner what is called an Option Exercise Price — equal to the current value of the home multiplied by the percentage of the future change in value granted to REX & Co. If the home increases in value, REX & Co. shares in the gain. If the home declines in value, REX & Co. shares in the loss.

Confusing enough. The key is in this statement, “…If the home declines in value, REX & Co. shares in the loss.”! Of course it applies to the gain side as well. So, if your property falls in value by $50,000 from the time the agreement is entered into, and you take out a $100,000 line, you’ll only have to repay $75,000 when you sell since the Rex lender splits the $50,000 depreciation with you! In meantime, you could invest that $100,000 and earn X%!


Lets move onto the math and see if this loan may work for you. Your probably thinking, “OK, take the loan, go on a vacation, pay off some credit card debt, and buy that car I always wanted….” aren’t you!

I’m thinking, “…what if you take that loan amount and invest it at 7-8% and then sell your house at a LOSS?” (interest earned on rex loan not compounding since I cant do that math yet in excel and I have a spreadsheet below to analyze this loan and whether it works). Hmmmm. Now that certainly is interesting. If you borrow $100,000 and then sell the house at a loss of $75,000 five years later, would you make more money at the end of the day if you did the loan & invested the money or not?

Lets run some numbers and make some assumptions. If you are going to do this agreement, you should understand what you are getting involved in. This spreadsheet should simplify the decision by taking into account your personal situation and your expectations. Use only as a guide.

DOWNLOAD REX LOAN TEST NOW (fill in yellow boxes – the rest will automatically compute)


Fact is, this product seems beneficial for anyone who thinks the property of their home will fall or remain flat from the time the Rex Agreement is entered into and ultimate sale. The reason is you are earning investment income on the money provided to you. Rex lenders take a 50% gain or loss with you, making the loan product very attractive if there is a loss! The only situation I see this agreement not being beneficial is if the property value JUMPS from the time the agreement is entered into and ultimate resale.

When there is a gain, the Rex lender comes out the winner and you get LESS MONEY than if you didn’t do the loan! But what about the earnings you made with the money you got from the Rex lender? Remember, you pay NO interest or monthly payments on that money.

The actual COST of the loan product varies so be sure to go directly to REX & CO. to save any transaction fees if you are interested. The fine print:

“Homeowners who arrange for their Rex Agreements directly from the company pay no fees, but financial advisers, mortgage brokers, and real estate agents licensed by Rex to sell the product can charge fees up to $2,000.”

I urge you to talk to your financial adviser about a play like this before doing it. While it seems a very interesting product, I did not read the terms and conditions of this type of agreement and therefore I don’t know what other payments or penalties there might be associated with this product. I already found this via RealEstateJournal.com:

People who sell the home in less than five years face an “early exit” fee ranging from 5% to 25% of Rex’s initial payment.

The Pitfall – Using the Rex agreement money for luxury items. This entire analysis is based on the assumption that you are investing the money provided to you via this agreement. The argument for using this type of product strengthens if you are disciplined to invest the money wisely and at the same time feel the housing market is heading lower. If you will not use the money wisely OR feel the housing market has tremendous upside potential, this is not the loan product for you.


Also, using the money for renovations on the property means you will get more money at eventual resale that is not 100% yours! You split that gain with the Rex lender 50/50 now remember! So, money used for major contracting won’t return as much profit to you as you may think.

The Appraisal – The Rex agreement’s benefits will stem greatly depending upon the appraisal of your property at the time the agreement is entered into. It will be to the Rex Lender’s advantage to be very conservative with this appraisal of your property! No doubt the homeowner will think their property is worth more. But because the Rex lender shares in the profits and/or loss on the property at ultimate re-sale, it is to the lender’s advantage to appraise the property as low as possible so as to ensure a 50% cut of the profit down the road. If you do decide to take on a product like this, only do it if the current property valuation is acceptable to you given current market conditions.

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Over the last month EquityKey has had some outstanding coverage in the NY Times and US News & World Report. Today we can add the Wall Street Journal to the list of major publications who have evaluated and opined on our business model. I have attached the article for your review:


In keeping with the skeptical eye of a personal finance writer, the author of this column does a solid job of explaining our product as well as pointing out the trade-offs that an individual consumer must consider when entering into such an agreement. The author does make some technical mistakes in how our program operates, but does convey the general concepts successfully. Just as the reverse mortgage industry has suffered its share of assaults, we appreciate the critical eye with which the Journal examines our product – our business and product are solid; the decision to take our product vs. some other program is a personal decision that a Senior must reach through careful consideration of all of their options!

Some major elements of EquityKey that the author did fail to capture in her article include:

1) EquityKey is also available on commercial property, raw land, investment property and second homes! This incredible flexibility allows seniors to unlock capital in properties for which there are no reverse mortgage solutions or other suitable products.

2) When your client doesn’t have enough equity in their property to enter into a HECM reverse mortgage, EquityKey can still be employed to create liquidity to meet living expenses.

3) The collapse of the Jumbo Reverse market has left a tremendous void for owners of higher-end primary residences. With EquityKey you can continue to unlock capital from properties of all sizes – meaning that you still have methods for releasing equity in cases where other solutions are not even available.

Let me know if you have questions from this article or any of the others that have been written about us over the past month. The key takeaway I see here is that we have had the biggest financial newspaper in the country try to poke holes in our business and the most they can say is that a consumer should always know the ins and outs of any agreement before they enter into it. As far as I am concerned, education is the cornerstone of creating satisfied clients.


Money Matters
Trading on the Future

‘Equity release’ is the newest way to turn your home into a piggy bank. But the risks can be sizable.
September 13, 2008; Page R6

When Gladys Tully needed cash for some home projects, the 72-year-old decided to tap into the value of her $800,000 home near San Diego.

But rather than use a home-equity loan or reverse mortgage, Ms. Tully opted for a new product, frequently called a shared-appreciation arrangement or equity release, which is gaining popularity among homeowners in or near retirement.

Although different companies structure the transactions in different ways, the premise of the arrangement is the same: A homeowner agrees to give up part of a home’s future appreciation in exchange for cash — typically 10% to 15% of the property’s current value.

When Ms. Tully signed on early this year with EquityKey LLC, a real-estate investment company in San Diego that offers shared-appreciation arrangements, the former travel-agency owner received $106,000, or about 13% of her home’s value. In exchange, EquityKey will pocket half of any future increase in the home’s value — taking its share when Ms. Tully sells the house or terminates the agreement.

“I could have sold some of my investments to pay for these extras, but that’s what I live on,” says Ms. Tully, who enjoys painting and travels frequently.

What to Consider

Shared-appreciation agreements can make financial sense for some older adults. For one, they offer some protection against the current turmoil in real-estate markets. If a property’s value has declined by the time the owner decides to sell it or terminate the contract, the homeowner gets to keep some or all — depending on the product — of the cash he or she is given upfront. What’s more, homeowners aren’t saddled with monthly payments, as in the case of a home-equity loan. And closing costs are typically less than that of a reverse mortgage.

But these deals also carry considerable risks, according to some real-estate experts. In the first few years of a contract, lenders are generally protected from bearing their share of the losses. And if a home appreciates over the life of an agreement, this approach could prove more costly than a conventional loan.

“From the perspective of the companies, this may be a very good time to do these deals,” says Susan Wachter, a professor of real estate at the University of Pennsylvania’s Wharton School of Business in Philadelphia. “When prices rebound, they will capture that in their share of the appreciation.”

For clients, she adds, “it’s another one of those products that reduces the use of the home as a vehicle to save. At this moment in time, people may flock to this, but it would be really myopic to simply look at the experiences of the past year or two as an indication of the evolution of home prices.”

Worried about the housing downturn, some homeowners are using the arrangement to cash in a portion of their home’s current value. Others are investing the money they receive in stocks or other investments they expect to outperform residential real estate. Some others are trading away future profits to pay down debt and fund indulgences, such as renovations and vacations.

The number of companies offering these profit-sharing arrangements has risen to three from one during the past 18 months — EquityKey; Rex & Co., a real-estate company based in San Francisco; and Grander Financial Inc., a financial-services company in Irvine, Calif. A fourth, NestWorth Inc. of San Francisco, plans to enter the market by year end.

The firms decline to say how many clients they have enlisted. But EquityKey says in the first six months of 2008, applications jumped 112% from the year-earlier period. At Rex, the dollar value of deals completed in the first half of the year rose 20% from all of 2007. The products are sold mainly to people in or near retirement. Applicants to NestWorth and EquityKey must be at least 60 and 65, respectively. At Rex, which has no age restrictions, the average client is 56.

“This is an area…that’s just being discovered in financial-services circles,” says Peter Bell, president of the National Reverse Mortgage Lenders Association, a trade group based in Washington, D.C. “I think we’re going to see a lot of innovation in this area in the next couple of years.”

Cheaper Than Loans?

In promotional material, these agreements present themselves as an alternative to debt. But that doesn’t necessarily mean they will prove any cheaper than a conventional loan.

Take George Lifshutz’s Rex agreement. A year ago, the retired New York City police officer pocketed $38,000 from Rex in return for signing away half of the future gains on his home in Sunrise, Fla. Since then, the plummeting housing market has reduced the home’s estimated $295,000 value.

The terms of his agreement call for Mr. Lifshutz to repay the $38,000 — plus Rex’s share of the profits or minus its share of the losses. With Mr. Lifshutz’s home now worth less, he can deduct Rex’s piece of the loss from the $38,000 he borrowed. That isn’t a bad deal, considering that with a conventional loan, he would have to repay the $38,000 plus interest.

Still, unless Mr. Lifshutz sells his home, Rex can delay his repayment until the contract’s fifth anniversary. By then, there’s a good chance that home values in many parts of the country will have recovered.

Many economists expect home prices to turn around by late 2009 or early 2010, unless the economy enters a deep slump. In the coastal regions in which EquityKey, Rex and their rivals concentrate, the turnarounds could prove especially dramatic.

“In these supply-constrained states, annual price increases of 5% to 10% aren’t unusual,” says Prof. Wachter. For those who need the appreciation from a home to pay for assisted living or long-term care, she adds, the notion of trading it away makes little sense.

What if property values rise over the course of an agreement?

Consider a homeowner with a $500,000 home. Under an agreement with Rex, he or she would receive $62,500 in return for signing away half the home’s future gains. Assuming the home appreciates by a relatively modest 3% a year, the home would be worth $671,958 in a decade. At that point, the homeowner would, at least on paper, owe Rex $148,479. That’s $62,500 for the cash advance, plus Rex’s half of the home’s gains.

With a government-insured reverse mortgage — a loan in which equity is converted into cash and a bank makes payments to the homeowner — the same person would owe just $126,676, according to Jerry Wagner, president of Ibis Capital, a San Francisco-based developer of software for reverse mortgage lenders and counselors.

Potentially ‘Very Expensive’

The homeowner would also come out ahead with a home-equity loan. With an 8.06% interest rate, the going rate these days, someone borrowing $62,500 would repay $91,234 in principal and interest over 10 years, says Keith Gumbinger, vice president of HSH Associates, a publisher of mortgage information. Shared-appreciation agreements, he adds, are “potentially a very expensive source of money.”

There are other potential downsides. Because the tax code doesn’t specifically address these arrangements, there’s a risk the Internal Revenue Service could require homeowners to pay tax on the upfront payments. The companies, citing opinions from law firms they employ, maintain that no tax is due until the home is sold or the agreement is terminated. And at that point, the company and the homeowner each would pay the capital-gains tax rate on their respective shares of the profits.

Then, there’s the matter of control. As lien holders, EquityKey and its peers have the right to look over a homeowner’s shoulder — and even call some of the shots. Rex, for one, caps the amount of mortgage debt its clients can carry — the percentage varies by transaction. If an owner fails to pay the property taxes or perform any necessary repairs, the companies can pay the bills for him or her — and deduct the costs from the owner’s share of the pie. In extreme situations, such as a mortgage default, they may even sell a home.

Additional Fees

Closing costs on these transactions are relatively modest. Fees range from $300 at EquityKey to as much as 3% of the upfront payment at Rex. But those who sell or otherwise seek to close out these transactions before five years have elapsed may be slapped with additional fees — amounting to as much as 5% of a home’s value at the time the agreement was made. And no matter when a home is sold, the homeowner will be on the hook for all the real-estate commissions and fees, which can add up to as much as 6% of the home’s sale price.

With EquityKey, homeowners face another issue. The company doesn’t generally require clients to return the upfront payment. But because it won’t make much money if a client dies before his or her property has appreciated much, EquityKey buys life insurance policies on its clients.

As a result, the company turns away those who aren’t healthy enough to secure coverage at reasonable rates — as it turns out, more than half of its applicant pool. And those who sign on only to decide later to buy a life-insurance policy for the benefit of their heirs may discover that they have already used up much of the coverage an insurance company will sell them.

“If you die tomorrow, I will get burned on your real estate,” says Jeffrey Nash, co-founder of EquityKey, “but I will make money on your insurance policy.”

–Ms. Tergesen is a staff reporter for The Wall Street Journal in New York. She can be reached at encore@wsj.com.

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Reuters published June 18, 2008

EquityKey Offers New Option to Homeowners in Tri-State Area

New tool allows older property owners in New York, New Jersey and Connecticut,
to tap into the value of their properties today, without a loan or mortgage

SAN DIEGO, June 18 /PRNewswire/ — The current credit crunch has many
Americans facing difficult financial decisions, and older property owners in
the New York metro area are no exception. Nationwide, homeowners age 65 and
older are sitting on an estimated $4.3 trillion in home equity value.
EquityKey, a real estate investment company, announced today that it now
offers property owners in New York, New Jersey and Connecticut a new tool to
unlock some of that value.
    The Equity Key Real Estate Option(TM) — also available for properties in
California and Florida — is a unique alternative for those between the age of
65 and 85 who may be considering a reverse mortgage or other home loans, or
simply want to diversify their portfolio for smarter investing.
    “EquityKey offers qualified property owners a novel new tool for tapping
into the value of their home or property without borrowing against their
equity,” said Jeff Nash, co-founder of EquityKey.  “We built our program based
upon confidence in the long-term health of the real estate market, which
allows us to offer short-term financial diversification to our clients. We
believe our product will change the way owners in New York, New Jersey and
Connecticut think about the value of their residential or commercial
properties within their broader financial portfolio.”
    The EquityKey Real Estate Option gives property owners the opportunity to
receive typically 10 to 15 percent of the assessed value of their property as
an upfront cash payment in return for selling 50 percent of its future
appreciation to EquityKey. The sale of this Real Estate Option does not dilute
the owner’s current equity. Unlike a reverse mortgage or other home equity
debt product, the EquityKey payment does not accrue interest and does not need
to be repaid as long as the homeowner abides by the EquityKey option

About EquityKey
    EquityKey(TM) is a real estate investment company which offers the
innovative EquityKey Real Estate Option. Marketing to property owners in
California, Connecticut, Florida, New Jersey and New York, EquityKey partners
with these clients to tap into the estimated $4.3 trillion in home equity held
by Americans 65 and older. Based in San Diego, CA, EquityKey is a subsidiary
of KBC Financial Products, a U.S. unit of the $450 billionBelgium-based KBC
Bank NV, one of the leading financial institutions in Europe.
SOURCE  EquityKey

Ted Deutsch, +1-609-924-7490, ted@deutschcommunications.com, for EquityKey

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