Just wondering if anybody can share some info on the Rex Agreement? I heard a radio commercial (in Chicago) and skimmed the website quickly. The quick and dirty is that they’ll give a cash amount based on the equity that’s in your house. The cash is yours to do as you please – it’s not a loan, reverse mortgage, or anything like that. The catch is that when you sell, obviously, they need to be reimbursed with a portion of the “profit”.
Say my house is worth $250K and I qualify for $35K (per the website). I also agree to split 50% of the future change in price when selling. When I sell for $300K I’ll get $275K and $25K goes back to them (300K – 250K = 50K change in price). They continue to say that if my house depreciates and I sell for $200K, then they’ll take nothing.
If all goes well, they’ll have given me $35K now and only receive $25K later. If things go poorly, they’ll still have given me $35K now and receive nothing in the future. Thinking this through further, suppose that I take the $35K but my house really appreciates and I can sell for $450K. I would then need to split $200k with them, so I’d get $350K and they’d get $100K. Now I’d look like the schmuck for giving up an extra $65K for a mere $35K (100K – 35K = 65K).
But what is worth more? $35K now or $65K in the future? Assuming that this Rex Agreement is legit, it seems to me that taking $35K now and investing it wisely to generate more money now is smarter than possibly collecting $65K in the future.
I have no idea how much I could personally get, but with $140K equity in my house, this has got me thinking. Of course, will this be taxed? And how? Other ramifications?
Any thoughts? Anyone with first-hand knowledge?
Thanks,
Mattman
Are you sure you don’t have to repay the original amount given to you?
Is there a minimum term for this agreement, and, is there a penalty for selling your house too early?
Is the appraisal truly independent? Seems that the Rex Agreement folks have an incentive to make the appraisal as low as they can get it.
I have not explored this product, so let me assume that you do have to repay the money you were originally given, and, forfeit 50% of the increase in value when you home is sold. If the property loses value, the you only participate in 50% of the loss.
Here is how I see this thing. Let’s use your numbers.
Your property appraises for $250K and you agree this is a fair appraisal. The Rex Agreement gives you $35K now. Five years from now you sell your property for $350K. The increase in value is $100K and you have to give away $50K of that and return the $35K you originally got.
If your property value stays the same or drops at the time you sell, then you return the $35K minus 50% of the decline in property value. If your property value declined to $200K, a $50K drop, then half of the decline is deducted from the amount you have to repay. In this case, you would repay $10K.
If my assumption is correct that you have to somehow repay the original amount you received, then this agreement only works to your advantage if your property’s value stays the same or declines, AND, if you reinvest the money you get at a fair return. Use the money to purchase luxury items and you won’t come out ahead.
Let’s now change the assumption. Let’s say that the amount you are paid today is consideration for an option you will give on 50% of the change in your property’s value. If your property’s value does not change when you sell the house, you owe nothing. The amount you received for your option, hedges you against a loss in value. If your property declines in value $35K, then you seem to break even. The Rex Agreement works to your disadvantage if your property experiences a sudden spike in value. Let’s say that your property is suddenly worth $450K when you sell. You have an equity gain of $200K and forfeit half of that. Is $35K now worth giving up $100K later? Depends upon how you invest that $35K and the return you can get on it now.
If this is the operating assumption, I am guessing that the Rex Agreement folks are betting that our real estate market is near a bottom, that real estate appraisals will come in at the low end of the range of property valuation, and that real estate will once again be a boom industry in the next three to five years.
ll the information I have states that the amount they give does not have to be repaid. The FAQ states the home can be sold anytime. If the property value goes down or stays the same, they get nothing from the sale. They are gambling (carefully calculating) that the appreciation is going to be going up significantly. Otherwise, why would they do this? My main question concerns having the cash in hand now to invest wisely. Can I make more with that cash now than I could by just waiting for the house to appreciate? Isn’t it true that money now is worth more than money in the future? Also, never do I mention purchasing luxury items. I am curious if this is a viable alternative to finance projects. Or if anyone has actually done this.
Thanks again.
mattman1968 - I don’t have any information about this… but this doesn’t smell good…
So let’s assume that a homeowner is planning on selling his house. Before he puts it on the market, he calls this company and gets money from them. The next day he puts the house on the market and sells it. He walks away with the money he received from this company + the equity in his house… :O)
There must be a catch…
Are you sure they get only 50% of the increased equity? I would read the information again to check if they are not getting 50% of the entire equity in the house… If this is the case, I can understand their business model…
Let’s assume your house is worth $350k and you owe $250k - so your current equity is $100k. They give you $35k and when you sell the house you have to give them 1/2 of the equity. So if you were to sell the house immediately, you would give them $50k (more than you took).
If you were to wait few years and your house would increase in value, you would pay them more than $50k.
If your house went down in value, they would start losing money only when your house gets below $320k (when your house is $320k, than they would get 1/2 of $70k, which is $35k).
Without considering cost of opportunity for the money they gave you upfront, and the reduction in principal over time…
Anyway, I can see this working if they were to take 1/2 of the entire equity of the house. And if that is the case, you would need to evaluate the actual numbers - how much are they willing to give you agains the equity you have today.
A lot of assumptions… So you will need to read the fine print… :O)
Good luck! Keep us posted!
A variable rate loan is one thing. Throwing around numbers like this depending on future property values is ludicrous. I’d run and run fast…
They are advertising on TV around here. With the money they are spending, you can be certain that they’ve got it figured out how they come out far ahead on the deal. They aren’t spending that much just to “help people out”.
I know people who stay in one place forever. They must have something in the agreement that saves them for waiting 40-50 years until someone dies.
What it says (or implies) on their website, isn’t necessarily what it is going to say in their contract.
I tend to agree. That’s why I’m asking if anyone knows exactly how this works.
My original post may, or may not, lead one to think that I’m leaning towards this however I’m merely trying to learn about it. Getting cash now for my equity is tantalizing…but at what cost? That’s what I truly want to know.
Why not simply refinance to cash out some of your equity? You won’t have to give any of it away when you sell.
Dave T - I believe mattman1968 is trying to get the best deal he can possibly get… If this Rex Agreement can put more money in his pocket it may be worth it… He is trying to understand the pros and cons of this deal before he makes a decision.
Mattman1968 - why don’t you ask to see a copy of the contract? I believe they would be willing to send you a copy so you can examine it beforehand. And let us know what you learn… Good luck!