Equity share advantages

1. Equity Share Advantages Sell your home for 100% of market value and still keep an ownership interest. Home is easier to sell with low or no down payment. Seller still has equity left in the home. Seller is not a landlord – eliminating rental hassles. Seller can depreciate the interest in the property. Seller gets a percentage of the appreciation. Seller gets a percentage of the loan pay down . ADVANTAGES FOR THE SELLER

2. ADVANTAGES FOR THE BUYER. Buyer has ownership interest immediately. Buyer gets in for 3 months security deposit plus closing costs. Buyer gets more home for their down payment. Buyer gets interest deduction & R.E. Tax deductions. Buyer gets a percentage of the appreciation. Buyer gets a percentage of the mortgage pay-down. Buyer can buy the home at anytime during the agreement, at appraised value. Buyer has great flexibility with the equity share agreement.

3. Pro-Formance Realty Concepts 14219 W. Grand Ave. #112 Surprise, AZ. 85374 WHAT IS EQUITY SHARING? Investor & Occupier share in the purchase of a home. Typically, Investor pays the majority of the down payment. All parties share in the appreciation. All parties share in the tax benefits of mixed use property. Investor & Occupier enter into an Equity Share contract. The term of the contract can be 3-7 years. WHO IS THE TYPICAL OCCUPIER? First time home buyers, single parent. Someone that doesn’t have the down payment. But can qualify for the loan and make payments. Someone that has a poor credit history. (short sale/foreclosure) WHO IS YOUR TYPICAL INVESTOR? Family member/friend . Real Estate investor. Seller of a property.

4. Pro-Formance Realty Concepts 14219 W. Grand Ave. #112 Surprise, AZ. 85374 WHY IS THIS GOOD FOR THE OCCUPIER? The occupier gets in for a small down payment plus closing costs. Occupier gets an ownership interest to start. Occupier gets immediate interest and real estate tax deductions. Occupier gets a percentage of the appreciation. Occupier gets a percentage of the mortgage pay – down. Occupier can get on more home for the money. WHY IS THIS GOOD FOR THE INVESTOR? Investor has a built in long term payment to make all the payments. Investor has no tenant hassles. Investor gets a percentage of the appreciation. Investor gets a percentage of the depreciation on property. Investor get a occupier with a vested interest in the property. Investor can 1031 tax exchange out of the property.

5. Equity sharing can help close the gap for homebuyers This process brings together investors & homeowners to overcome today’s market. People still want to buy homes, tighter credit rules and down payment requirements are keeping many buyers out of the market. These stringent borrowing criteria are preventing many would be homeowners qualifying for a fixed rate loan. The ability for a prospective buyer to raise one fifth of the purchase price as a down payment is a key obstacle. Along with short sales & foreclosure. This scenario has contributed to a glut of homes now on the market in your area. The buy side has not dried up, it’s just dormant. The current situation is less a failure of demand as it is a failure to find workable financing. With the interest rates coming down and the prices of homes dropping, now is the time to start looking for a home before the market heads in the other direction. Twenty five years ago the real estate market faced a similar dilemma , and a safe effective solution emerged.

6. This solution is called “equity sharing.” it involves finding a match between willing buyers and willing investors along with agreeing to a formula for sharing future potential appreciation through mutual ownership. Over the years, the process has enabled literally thousands of people to become homeowners without taking second mortgages or having to wait years to save for a down payment . In a nutshell , equity sharing is a co-ownership agreement between investor-owner and an occupier. The investor puts up some or all the cash or equity for the down payment – usually 20% - and the occupier puts down a 3 month security deposit and has to qualify for a mortgage on the remaining 80% of the purchase price of the home. The occupier agrees to pay principal, interest, taxes and hazard insurance and any association fees and also is responsible for any repairs or maintenance. The term of such agreements is typically 5 years, but can range from 3 – 10 years. At the end of the agreement, the house can be sold, with each party receiving 50% profit on the home – after subtracting the original down payment by both the investor & the occupier.

7. The occupier can choose to refinance the property and has first right to buy out the investor prior to termination of the equity sharing agreement. If the occupier does not wish to exercise this option, the investor can refinance the property and buy out the occupier. Other alternatives include extending the agreement to wait for a higher market valuation or selling the property to a third party. While equity sharing may seem complicated, it really isn’t , and there are many benefits to be derived for both sides. For the investor, I RS tax benefits including a write off of any closing costs, depreciation and 1031 Tax E xchange, and an exit strategy for his investment. The occupier can buy property with little or no money down. The occupier gets IRS benefits as a normal homeowner , such as interest deductions etc. If payments are not made, the investor uses the occupiers original deposit plus any equity appreciation to cover what is owed. This deposit is returned when the agreement expires, if all payments have been made as agreed. As far the investor is concerned, this is a management-free investment. For tax purposes, proceeds to the investor from such and agreement are treated as long term capitol gains.

8. Owner occupiers can deduct mortgage interest and property taxes and when the property is sold – they can qualify for the exemption from capitol gains. Closing costs to acquire the property are not reimbursable and the occupier usually pays between $900 - $1200 and the investor pays the balance. The closing costs and sales commissions are split 50/50 when they decide to sell the home. Risks associate with equity sharing are few. The occupier could default on the mortgage or have to relocate prior to the end of the term. In such an event, the property could be rented. In addition, the housing values could decline or a spouse could die during the term, thus delaying the final transaction. The flexibility of Equity Sharing makes it easy for both parties to terminate the agreement without going to court or arbitration. The independent investors and builders can use this process to more easily sell their properties. In a tough real estate market, buyers with fully documented credit, good incomes and steady jobs can still qualify for a 80% mortgage. Equity sharing is a time-tested way to close the remaining 20% down payment gap with relatively low risk.