EquityKey Rolls out New Home Price Appreciation Product

EquityKey, which formerly offered a product that allowed homeowners to sell their future home appreciation has revamped its product for rollout into the market. The company is back online with new funding partners, allowing homeowners with at least 35% equity to receive between 6% and 17% of a property’s current appraised value in exchange for future appreciation.

The San Diego-based company, which previously purchased future home appreciation and hedged its risk with life insurance, is now offering a product that is open to all ages and does not require an upfront health screening. 

The new EquityKey product is based on the Case-Shiller Home Price Indices—a national measure of home price appreciation released monthly. 

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“It’s now available to all ages,” says Wendy Beerbower, vice president of sales. “That said, I think we will probably skew to the majority of clients being baby boomers and seniors.” 

The new product is not a loan, rather, it is a performance deed of trust. The homeowner agrees to a percentage of home value appreciation upon signing of the contract with EquityKey, and can use the proceeds of the agreement however he or she chooses. 

The product is not geared toward a specific consumer group, but EquityKey sees it appealing to the “sandwich generation” of baby boomers who are helping aging parents as well as adult children financially. 

“The aim is to provide liquidity to people when they most need it,” Beerbower says. “When their income stream is diminished or gone.”

Currently, the product is being offered in California, New York, Connecticut, New Jersey and Florida, with plans to further introduce it through channels including financial planners and real estate professionals. 

The homeowner receives the funds from EquityKey within four weeks of application, with the only fee being the cost of the home appraisal. 

If the homeowner moves within a certain number of years, he or she will face an early termination penalty. That period runs about seven to 10 years, before which the homeowner will owe a minimum settlement amount. 

“This is a great solution where debt might not be the right option,” Beerbower says. “Maybe selling an equity share is. We’re covering the downside as well. If someone gets $100,000 from EquityKey and the home value drops, they’ve already gotten that $100,000 and are keeping themselves whole.” 

Written by Elizabeh Ecker

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  • “This is a great solution where debt might not be the right option,” Beerbower says. “Maybe selling an equity share is.”

    Once again a breath of fresh air in a sea of confusion. Since when has a mortgage ever been anything other than a lien? In and of itself, a mortgage is not a conversion of equity. When it comes to the principal residence owned by a homeowner, there are two main forms of equity, math equity (value minus liens) and legal equity, i.e., what the rights the homeowner possesses. Equity Key and The Rex Agreement are conversions of a portion of equity into cash.

    In real estate law, real estate ownership is pictured as a bundle of sticks with each stick representing a right. It is this bundle, i.e., equity, which the homeowner possesses constitutes equity. The number and types of sticks found in that bundle are used in arriving value. One of those sticks (rights) is appreciation. The Equity Key sale is a transaction which results in some portion (or all) of one of those rights from the homeowner to the acquirer in exchange for cash. Other rights which are commonly transferred are mineral rights, drilling rights, water rights, and air rights. Those are true equity conversions.

    At the inception of both the HECM and the Home Keeper programs, equity conversions were offered along with the mortgage. They were referred to as shared appreciation rights (or SARs). Much like the other two products, Equity Key and the Rex Agreement, SARs allowed the respective borrowers to convert a portion of legal equity into cash.

    A movie which clearly showed that the sum of the value of the sticks was greater than the value of the bundle was Burlesque in which a building owner was able to buyout her partner, payoff her mortgage which was in default, and renovate the improvements which housed her business by simply converting equity into cash (selling off the air rights of the building) to a condo developer who would see the value of his under construction condo development plummet if an office building developer who was negotiating to buy the location of a burlesque show to tear the eyesore down and replace it with a towering office building. The value of not losing the views of those condos was more than offset by the price paid for the air rights. In this movie equity conversion saved the day.

    Don’t be fooled, a mortgage is not an equity transaction but it is definitely a transaction which impacts the equity equation ( or EQUITY EQUALS HOME VALUE MINUS LIENS or E=V-L.

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