Can we sell or buy banks?
Partial sale of your own property: what are the catches of the offers?
Anyone who needs money and owns a property has always been able to use it as security in order to receive particularly low interest rates. One then speaks of a mortgage or a mortgage loan. Now we can see that companies are approaching consumers with new, supposedly simpler offers.
For example, Wert Faktor, Engel & Völkers, Heimkapital or Deutsche Teilverkauf are offering to buy part of the property and quickly pay larger sums of money for it. The offer is called "partial real estate sale".
The advertising promises are: "Live like always - live like new" (Engel & Völkers), "Your property pays off" (value factor) and "Smarter living" (German part purchase). Interested parties can have the value of their property assessed online and quickly see concrete sums that they can have paid out. The companies want to become co-owners for this, but otherwise not interfere much with the property.
But is a partial sale really an attractive offer - or are there any pitfalls? And what are the alternatives?
Anyone who sells should pay a kind of rent in the future
First, important point: Anyone who sells part of their property should pay the company a monthly fee for it. The larger the portion that you sell fails and the more valuable the property is, the higher this fee will be. The remuneration is usually only fixed for a certain contract period and then re-agreed. But it can also be variable and increase automatically with the inflation rate. If you want to avoid the monthly burden of the user fee, you have to transfer more parts of the property to the provider as the usage increases.
In an example on its website, the value factor calculates a property with a total value of 500,000 euros: If you sell 20 percent of it and receive 100,000 euros, you have to pay 275 euros per month from now on (accessed in May 2021). After 20 years, that would add up to 66,000 euros. At Engel & Völkers, Wertkauf, Deutsche Teilkauf and Heimkapital, the usage fees are comparable, but may differ slightly.
In the example, that's 3300 euros or 3.3% of the payout amount per year. Is that serious and appropriate? It depends on what you are comparing these payments with. You can compare them, for example, with rent payments or loan interest:
At the Comparison with the amount of a rental payment the annual cold rent per square meter based on the purchase price per square meter would have to be used. Then you get what is known as a rental return. This can be very different, depending on the condition and location of the property. In some areas of Germany it is over 6 percent, in others less than 2 percent. The metropolises tend to be at the lower end because here the rent is related to the recently significantly increased prices.
But be careful: you would have to take this into account when making such comparisons Maintenance costs (For more on this, see "The companies do not share any additional costs" below). Because in the case of tenants, these are actually borne entirely by the landlord. The companies that buy parts of your property are turning the tables: As part of the property owner, you are supposed to pay a rent and bear the full costs of investments and maintenance.
At the Comparison with loan interest you can compare the usage fee of around 3% of the purchase price with the interest for a loan of this amount. The loan interest for real estate loans is currently below 1% p.a. with good creditworthiness (see below: "Calculate exactly"). A loan would then be much cheaper.
Anyone who later sells their property in full pays additional fees
If you no longer own the entire property because you have sold part of it, this constellation will also be interesting: What happens if you want to sell the entire property to a third party?
The offers here provide that you receive a share of the sales proceeds based on your remaining share. So if you had sold 20 percent, for example, you would get 80 percent of the proceeds if you sold it completely later.
But: You have to expect additional fees. If the property, of which 20 percent has already been sold, is later sold in full for a total of EUR 700,000, then, for example, calculate the value factor with one Implementation fee of 6.5% of the sales price, which corresponds to 45,500 euros. At Engel & Völkers one comes up instead Processing fee of 5.5% and for home capital Service fee of around 4.5% of the sales price. In the case of Deutsche Teilkauf, however, no such fee is charged.
For the requested payment of 100,000 euros (20 percent of the value in the case of partial sale), in our example, after 20 years, the value factor receives a total of 251,500 euros (usage fee 66,000 euros, implementation fee 45,500 euros, proportional sales price 20% of 700,000 = 140,000 euros).
Danger: Some providers even protect themselves against a loss of value of the property. If the property is later sold in full, the provider gets at least the money invested and a surcharge of, for example, 17% additional costs as a "minimum share".
You should be aware of this from the outset as the cost of the deal.
The companies do not participate in maintenance costs
No property can do without investments in the long run. Whether it is about repairs or even about increasing the value of the property with modernizations - companies do not want to share in such costs. For example, if you have sold 50 percent of the property, you would still have to pay the full amount yourself for a new heating system, insulation, roof repair or similar.
Keep in mind: You will maintain or increase the value of the property for your contractual partner with such measures. Those who invest large sums in modernization and then sell the property not only benefit from the higher sales price, but also give shares to the company from the higher proceeds.
Whether that is fair is probably a matter of opinion. It is common practice with shared property ownership, as every owner of apartments in apartment buildings knows, that all costs are divided according to ownership shares. In the case of partial sales, this is not the case: maintenance costs and usually also the sales costs are entirely your responsibility.
Do the math: A loan can be much more attractive
With all that in mind, you can look at the interest rates on traditional bank loans. If you borrow up to 50% of the property's value from your bank, then top conditions are possible, depending on your creditworthiness. Currently, the interest rate for a ten-year fixed interest rate is even below 1 percent per year. Compared to a usage fee of 3 percent per year, this can be a much cheaper business.
If you were to only pay interest of 1% for the loan of 100,000 euros for twenty years, then you would pay interest of 20,000 euros and the loan amount of 100,000 euros to the bank during this period. That is half of what you would have to pay if you sold part in the example above.
With a loan you also retain full ownership, with the full chance of appreciation (admittedly, but also the full risk of depreciation).
The interest is always an individual price and it is a matter of negotiation. Those who are self-employed or who have reached old age must expect to receive loans only at higher interest rates.
If you are persuaded that you have no chance of a low-interest loan, then we advise you to ask around at various providers. The decisive factor is not age or independence, but the overall financial situation and - even more important - the business policy of the respective credit institution. Some lend to retirees, while others do not. Occasionally, consumers tell us that their bank does not provide a loan to older customers for legal reasons. However, this is not correct. There is no law requiring borrowers to repay the loan in full while they are still alive.
If you are still unsure whether you want to sell all or part of your property, you can postpone the decision with a loan. A partial sale is also possible later, for example to replace the loan.
Clarify pitfalls, examine alternatives
The offers on the market are not standardized. They can be very different. In our article we can only draw your attention to a few points. This is no substitute for a careful legal examination of all pitfalls. It is quite possible that you can improve your legal position through individual additions to the contract. The following can be of interest, for example:
- It is conceivable that you a lifelong usufruct can agree. This means that you alone have the right of use and are not dependent on the benevolence or consent of the provider. But watch out: if you fail to meet your obligations, such as paying the usage fee, you risk eviction and foreclosure - similar to a loan agreement.
- Would you or your heirs want to keep the option open buy back the sold part? How should the then applicable repurchase price be calculated? Is this done by commissioning an expert and, if so, is his independence ensured? Or should a purchase right be agreed for which a purchase offer from a third party is decisive?
In view of the high usage fees compared to loan interest, additional costs and the complexity of the contractual obligations that a partial sale entails, the question arises under which circumstances a partial sale could be advantageous at all. Possibly if one assumes that the property will lose a lot of value (in which case a complete sale would be the better decision).It would also be conceivable that the loan interest rates that banks offer you for your specific situation are much higher than the general interest rates of around 1% per year for real estate loans.
If you are toying with the idea of selling part of your property, always get specific contract offers. The figures mentioned here are only taken from the websites of the providers.
Selling or lending your own property - and still living in it yourself: A so-called reverse mortgage or an annuity are also possible. We describe these possibilities and their advantages and disadvantages in a separate article.
It would also be conceivable that you could find a buyer for your property and conclude a lease with him that would ensure that you can live in your old property over the long term. Some prospective buyers may also be willing to sell the property at a market price minus a price for a lifelong usufructuary right.
If you need independent advice on loan offers, you can turn to your consumer advice center. You can also bring specific offers to such an appointment, have them calculated and have the advantages and disadvantages described. The pitfalls of a notarized purchase contract, on the other hand, are best always checked by a lawyer.
This content was created by the joint editorial team in cooperation with the consumer advice centers in Baden-Württemberg and Bremen for the network of consumer advice centers in Germany.
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