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  #1  
Old 06-19-2008, 08:35 AM
brian brian is offline
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Default Rex Agreement

Anyone else think this is probably the dumbest way to try and get cash out of your home?

Homeowners Offered New Way to Tap House's Equity - Real Estate * US * News * Story - MSNBC.com

While times are hard, sure, it can look like a "steal" - but your property is probably most people's largest investment they will ever make, and it's a long-term investment at that.

Which means cashing in part-equity now but selling a major stake in your investment just seems plain dumb to me:

Quote:
Under the Rex Agreement, a homeowner with a $500,000 house can get $71,429 now in exchange for a 50/50 split on the home's appreciation (or depreciation) going forward.

Over the last 20 years, single-family home prices have gone up 6.5 percent a year, according to industry data compiled by data360.org.

If the home appreciates 6.5 percent a year for 10 years, that means that in 2018, the home would be worth $938,568.

The homeowner would owe Rex $71,429 plus $219,284, half of the appreciation, for a total of $290,713.

If, instead, the homeowner borrowed $71,429 at 10 percent interest—higher than the current going rate for second mortgages for good credit risks — he would end up paying $41,844 in interest, for a grand total of $113,273.
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Old 06-19-2008, 04:08 PM
Jerrydill Jerrydill is offline
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Default Re: Rex Agreement

This sounds like a scam. People are taking advantage of the credit situation and it just isn't fair. Some people will enter into this trap to get out of debt. It's a short term decision. In the long-run they'll realize what they had done wrong.
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Old 06-19-2008, 04:37 PM
spencer24 spencer24 is offline
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Default Re: Rex Agreement

Quote:
Originally Posted by brian View Post
The homeowner would owe Rex $71,429 plus $219,284, half of the appreciation, for a total of $290,713.

Yes, but this is assuming that the real estate market will rise in the next 10 years. The way I see it homeowners will be lucky if 10 years from now their properties cost the same in nominal dollars as today.
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Old 06-19-2008, 05:20 PM
brian brian is offline
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Default Re: Rex Agreement

True - but who buys a property just for 10 years?

It's a lifetime agreement that the Rex Agreement seeks to profit from, against the long-term interests of the home owner.

Just my 2c though.
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  #5  
Old 06-20-2008, 07:18 AM
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GarySpicuzza GarySpicuzza is offline
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Default Re: Rex Agreement

Quote:
Originally Posted by brian View Post
Anyone else think this is probably the dumbest way to try and get cash out of your home?
Yes, Brian I agree.

The lender is nothing more than a real estate investor and you can bet they set the starting value of the home on the very lowest end of the scale to lend less money on the low value but more equity will be shown at the end.

This violates two time tested money management laws:

1) Make your home a profitable investment.

2) Money flees from the person who would force it to impossible earnings or who follows the alluring advice of tricksters and schemers or who trusts it to their own inexperience and romantic desires for investments.

The bottom line is that you don't even know how much interest as percentage of the original loan amount you'll eventually pay. Will it be 6%, 11%, 2% 18%.... plus all the capital improvements you make to your home while you're living in it, pool, hot tub, patio, lawn, etc... all go to enhance the home's value for the direct benefit of the lender without them investing another dime or doing any of the work.

People are just flat out Stuck-On-Stupid when it comes to borrowing money anyway they can and the big money investors know that and take full advantage.

People aren't very good at 4th grade math either.

Then once the day traders playing stocks like a flea market swap meet get hold of this they'll convince you to take this loan put the proceeds in the market and walk away with a gazillion dollars the second Tuesday of next week!

It's Win-Win-Lose.
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Old 07-15-2008, 08:40 AM
rachael24 rachael24 is offline
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Default Re: Rex Agreement

Thanks for the explanation Gary...I agree that most people are stuck on stupid at borrowing.
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