Sell part of your own house and still be able to live there – with a nice sum of money in one fell swoop. That sounds tempting at first. But the financial regulator sees many risks.
The German financial supervisory authority warns against partial sale models of real estate, which are mostly aimed at older people with the promise of financial freedom. “Partial sales are advertised as fast, uncomplicated and safe for life. In fact, partial sales do not keep much of what the advertising promises,” emphasized the Federal Financial Supervisory Authority (Bafin).
Providers such as Deutsche Teilkauf, Hausanker, Heimkapital or Engel & Völkers advertise with partial sale models. With the money raised – in some cases a six-figure sum – owners could afford long-cherished wishes such as long trips, a mobile home, the conversion of the house to suit seniors, renovations or simply a higher standard of living, it is said. At the same time, they retained control of their property right through to its repurchase. As a rule, the providers are aimed at senior citizens who have their old-age provision in their own property but have a relatively low pension.
From Bafin’s point of view, there are a number of pitfalls in the models. A high partial purchase price sounds tempting. However, according to the information, the monthly usage fee as well as the minimum revenue and all fees for the total sale are based on this. And after a partial sale, the running costs of a property continue to accrue, even if there is a co-owner.
The part-purchase company also always gets at least the part purchase price “plus X” for its part of the property in the case of a part sale or buyback, even if the property has not increased in value. The determined market value, which is the basis for the partial purchase price, can also deviate from the actual sales value.
“It’s risky and can get expensive”
Furthermore, the Bafin warns of “sometimes incalculable” monthly fees. “With a usage fee of, for example, five percent of the partial purchase price per year, the partial purchase price received will be used up in twenty years.” The fee is usually fixed for a certain period of time, around ten years. After that there could be an increase. Anyone who can no longer pay the user fee is threatened with the sale of the house and moving out. And a buyback is so expensive that this is often only a theoretical option.
Many disadvantages only became apparent later, for example when the house or apartment is actually sold to a third party, the Bafin notes. “A real estate partial sale is rarely the best solution for house or apartment owners,” said Executive Director Thorsten Pötzsch. “It’s risky and can get expensive.” From a consumer protection point of view, he could only warn against “blindly trusting the ubiquitous advertising promises for partial real estate sales”.
The Bafin advises comparing offers from different providers, involving persons of trust or contacting consumer advice centres. Alternatives to the partial sale could be special mortgage loans from banks for older people.
The contracts of the models are very complex and difficult to understand, agrees Katharina Lawrence, a lawyer at the consumer advice center in Hesse. “Even for a lawyer it will be difficult.” Many seniors were ashamed to say that their pension was small. A stairlift can also be financed with a bank loan. In any case, it is worthwhile for interested parties to carefully consider a decision to sell a part. “It’s the last big financial deal you’ll do in your life.”
Source: Stern
