Bush Signs Landmark Housing Act

President Bush today signed legislation designed to ease the housing crisis and prevent similar collapses in the future. Read the $300 billion "Housing and Economic Recovery Act of 2008" and the new National Association of Home Builders' tax credit-related Web site to learn how the credit works.

by Broderick Perkins
© 2008 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - President Bush today signed legislation designed to ease the housing crisis and to prevent similar collapses in the future.

In the final back-and-forth between the U.S. House of Representatives and the U.S. Senate on the legislation, the House last week voted 272 to 152 to approve the "Housing and Economic Recovery Act of 2008". In a rare weekend session, the Senate followed with a 72 to 13 vote of approval.

President Bush agreed to sign the housing rescue package after initially voicing reservations about money for local communities to buy up distressed properties.

Unfortunately, the impact of the new legislation won't be felt until administrative issues are hammered out, likely by this fall or later.

In addition to helping communities with vacant properties, the package comes with stronger regulations for Fannie Mae and Freddie Mac, tax credits for first-time home buyers and higher limits (up to $625,500) on Federal Housing Administration (FHA) loans.

Not only is the government effort expected to save an estimated 400,000 homes from foreclosure, the legislation could raise the profile of an unconventional creative financing tool and push it into the mainstream of housing finance.

The give and take in the legislative fight has always included the creation of an FHA-sponsored equity sharing program (Hope For Homeowners) to refinance loans at a discount for home owners facing foreclosure. In return, home owners would share future equity gains with the FHA.

"The feds are about to take equity sharing to the next level," says Jeff Langholz, founder and CEO of HomeEquityShare.com, an online network that matches equity sharing partners.

First-time home buyer tax credit

Among other provisions is a maximum $7,500 tax credit for first-time home buyers or buying couples who have never owned a home or who haven't owned a home in the past three years. In the case of a couple, both cannot have owned a home ever or during the prior three years.

Eligible home owners are also those with homes that closed from April 9, 2008 to July 1, 2009. Only single taxpayers with adjusted gross incomes up to $75,000 and married couples filing a joint return with incomes up to $150,000 qualify for the full tax credit. In a "married filing separately" household a maximum credit of $3,750 can be claimed on each return.

Partial credits of less than $7,500 are available for some taxpayers whose adjusted incomes exceeds the limits. The credit is not available for individual taxpayers with adjusted incomes of $95,000 or more and for married taxpayers filing joint returns with incomes of more than $170,000.

All or a portion of the home buyer credit can be claimed as a refund even if the taxpayer has little or no federal income tax owed.

The credit, designed to provide a financial incentive for home buyers, is actually a no-interest loan that must be repaid over 15 years, beginning two years after taking the credit. If the home is sold within 15 years, the balance of the tax credit payback is due, provided there is ample capital gains. The credit payback is forgiven if there's no capital gain at the time of the sale. Details were still being ironed out, but taxpayers will likely be able to claim the credit on IRS Form 1040 and more information should be available in the next version of IRS Publication 530 "Tax Information For First-Time Homeowners."

Second home owners foot the bill

Unfortunately, the same law that gives home buyers some tax relief, takes away a tax-break windfall previously enjoyed by second home owners. To help foot the bill for the relief act Congress closed a loophole second home owners used to avoid capital gains taxes.

Under current law, married homeowners can exclude from taxation, up to $500,000 in gains from a home sale, provided the property was the primary residence for two out of the previous five years. The maximum exclusion for a single person is $250,000.

Vacation and rental property owners can legally double dip the exclusion by first selling their primary residence and capturing the tax-free gain. Then, after moving into the second residence for two years to qualify it as their primary residence, they are able to cash in again on the tax-free gain after selling the second home.

That ends January 1, 2009 when the housing relief act eliminates the capital gains exclusion for the portion of gain that came while the home served as a vacation or rental property. The act retains the tax benefit for any gain achieved during the period when the property served as a principal residence.

Here's an example for a homeowner who sells a residence after 10 years of ownership and the home was a vacation property for eight years. If the home owner realizes a $100,000 gain when the home is sold, $80,000 would be subject to capital gains tax. The remaining $20,000 would qualify for the exclusion. Of course, if the home is never used as a vacation property, and is the primary residence for two years out of the last five, the full $100,000 gain would still be tax free.

Because the law doesn't take effect until 2009, home owners who move into the vacation home before the end of 2008 will still be eligible for the benefits of the old law. For more information, see Publication 523, "Selling Your Home."

Other provisions include:

• GSE (government-sponsored enterprise) reform. The law reforms the regulation of Fannie Mae and Freddie Mac and permanently increases the conforming loan limit to help buyers in high-cost markets (to what) as the government temporarily expands its line of credit to Fannie and Freddie. It also permit the U.S. Treasury to purchase an equity stake in the companies through the end of 2009.

• Mortgage revenue bond program gives states the ability to issue an additional $11 billion in mortgage revenue bonds to help strapped borrowers seeking to refinance their home loans.

• An enhancement of the low-income housing tax credit to expand the supply of affordable rental housing.

The legislation is also based on five principles.

1. Long-term affordability. The program is built on the idea that creating new equity for troubled homeowners is likely to be a more effective way to avoid foreclosures. New loans will be based on a family’s ability to repay the loan, ensuring affordability and sustainable home ownership.

2. No investor or lender bailout. Investors and/or lenders will have to take significant losses in order to benefit from the proceeds of the loans refinanced with government insurance. However, these losses would be less than the losses associated with foreclosure.

3. No windfall for borrowers. Borrowers will share their new equity and future appreciation equally with FHA. Borrowers will pay for the FHA insurance.

4. Voluntary participation. This will be a voluntary program. No lenders, servicers, or investors will be compelled to participate.

5. Restore confidence, liquidity, and transparency. Credit markets frozen with risk aversion, in part, because banks and other financial institutions do not know what their subprime mortgages and related securities are worth. The uncertainty is forcing lenders to hoard capital and stop the lending necessary for economic growth. This program is designed to help restore confidence and get markets flowing again.

Learn more about equity sharing here.

Click here for a copy of the "Housing and Economic Recovery Act of 2008".

Click here for the new National Association of Home Builders' tax credit-related Web site which explains how the buyers' tax credit works.

Also see: "$700 Billion Bailout Overshadows $300 Billion 'Hope' "

Read still more bailout news that really hits home.

© 2008 DeadlineNews.Com

Advertise on DeadlineNews.Com

Get news that really hits home for your Web site or blog from DeadlineNews.Com.
Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's where all the news really hits home.

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

Read more!

Housing, Economic Recovery Act Certain

Legislation designed to ease the housing crisis and prevent similar collapses in the future awaits President Bush's signature. Read a summary of the $300 billion "American Housing Rescue and Foreclosure Prevention Act," also called, the "Housing and Economic Recovery Act of 2008"

by Broderick Perkins
© 2008 DeadlineNews.Com

Unauthorized use of this story is a copyright violation -- a federal crime

Deadline Newsroom - President Bush's signature is expected on legislation designed to ease the housing crisis and prevent similar collapses in the future.

In the final back-and-forth between the U.S. House of Representatives and the U.S. Senate on the legislation, the House this week voted 272 to 152 to approve what's initially dubbed the "Housing and Economic Recovery Act of 2008". In a rare weekend session, the Senate followed with a 72 to 13 vote of approval on what was finally called the "American Housing Rescue and Foreclosure Prevention Act."

President Bush agreed to sign the housing rescue package after initially voicing reservations about money for local communities to buy up distressed properties.

Unfortunately, the impact of the new legislation won't be felt until administrative issues are hammered out, likely by this fall or later.

In addition to helping communities with vacant properties, the package comes with stronger regulations for Fannie Mae and Freddie Mac, tax credits for first-time home buyers and higher limits on Federal Housing Administration (FHA) loans.

Not only is the government effort expected to save an estimated 400,000 homes from foreclosure, the legislation could raise the profile of an unconventional creative financing tool and push it into the mainstream of housing finance.

The give and take in the legislative fight has always included the creation of an FHA-sponsored equity sharing program to refinance loans at a discount for home owners facing foreclosure. In return, home owners would share future equity gains with the FHA.

"The feds are about to take equity sharing to the next level," says Jeff Langholz, founder and CEO of HomeEquityShare.com, an online network that matches equity sharing partners.

According to the summary, the legislation comes with five principles.

1. Long-term affordability. The program is built on the idea that creating new equity for troubled homeowners is likely to be a more effective way to avoid foreclosures. New loans will be based on a family’s ability to repay the loan, ensuring affordability and sustainable home ownership.

2. No investor or lender bailout. Investors and/or lenders will have to take significant losses in order to benefit from the proceeds of the loans refinanced with government insurance. However, these losses would be less than the losses associated with foreclosure.

3. No windfall for borrowers. Borrowers will share their new equity and future appreciation equally with FHA. Borrowers will pay for the FHA insurance.

4. Voluntary participation. This will be a voluntary program. No lenders, servicers, or investors will be compelled to participate.

5. Restore confidence, liquidity, and transparency. Credit markets frozen with risk aversion, in part, because banks and other financial institutions do not know what their subprime mortgages and related securities are worth. The uncertainty is forcing lenders to hoard capital and stop the lending necessary for economic growth. This program is designed to help restore confidence and get markets flowing again.

Learn more about equity sharing here.

Click for a copy of a summary of the Housing and Economic Recovery Act of 2008.

© 2008 DeadlineNews.Com

Advertise on DeadlineNews.Com

Get news that really hits home for your Web site or blog from DeadlineNews.Com.
Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's where all the news really hits home.

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

Read more!

Sharing The American Dream

Equity sharing could hit the main stream as an important stepping stone to home ownership if the Federal Housing Finance Regulatory Reform Act of 2008 creates an equity sharing program to help bail out home owners facing foreclosure.

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - Federal legislative relief for the nation's housing crisis contains a provision that could turn a rarely-used home financing option -- equity sharing -- into a key stepping stone on the path of home ownership.

Along with other provisions, the federal legislation would create a Federal Housing Administration-sponsored equity sharing program to refinance loans at a discount for home owners facing foreclosure. In return, home owners would share future equity gains with the FHA.

"The feds are about to take equity sharing to the next level," says Jeff Langholz, founder and CEO of HomeEquityShare.com, an online network that matches equity sharing partners.

Not only would the government effort save an estimated 400,000 homes from foreclosure, federal backing could raise the profile of the unconventional creative financing tool and push it into the mainstream of housing finance.

"Every transition in life comes with intermediate stages. Before you are married you get engaged, before you get your driver's license you get a learner's permit. Before you get to homeownership what intermediate transition is there?" he asks.

Langholz is banking on the equity sharing provision in the federal relief package. That may be a safe bet.

Both the U.S. House of Representatives (H.R. 3221 by Rep. Nancy Pelosi, D-CA) and the U.S. Senate (the unnumbered bill known as the "Federal Housing Finance Regulatory Reform Act of 2008" by Sen. Chris Dodd, D-CT) this summer passed versions of the same relief package. Both versions contain the equity-sharing provision.

In late July, federal legislators were reconciling differences for final approval, which is expected "certainly before the August break," said Pelosi spokesman Brendan Daly.

Equity sharing basics

Equity sharing is a symbiotic relationship -- as well as a legal agreement -- between two or more parties holding title to one home. Two or more parties share title in order to share the risk, thereby reducing the risk for both parties. Inevitably, however, home price appreciation is the bottom line. The property must grow in value over the term of the deal for it to really pay off.

Parties in the mutually beneficial relationship, and their roles are:

• The seller. The seller can use equity sharing as a way to quickly sell in a slow market. The seller can also become the investor and retain a stake in the property.

• The investor. Typically a non-resident owner, the investor provides the initial financial leverage in the form of a down payment or larger stake. He or she can be a family member of the occupying home owner (see below), a trusted friend of the occupying home owner or some private entity, say a professional investor. The investor gets tax deductions for his or her prorated share of the deal. With time, provided equity grows, the investor enjoys a joint venture-like return on the bulk of the investment.

• The occupying home owner. Often savings-poor, but income-rich, one person, with little or no money down, becomes the occupying home owner. He or she pays the mortgage and other costs associated with owning and occupying a home -- including taxes, insurance, maintenance and the like.

The occupying home owner gets to deduct a prorated share of the mortgage interest and property taxes, along with other tax breaks that come with home ownership. With enough equity growth, the occupant can eventually cash out, buy out the investor, keep the home or use the equity gain to buy another.

• Title to the home can be held in a variety of ways -- joint tenancy with right of survivorship, tenancy in common, partnership or as a living trust.

Variations on equity sharing

Like its creative financing cousins -- seller financing and lease options -- equity sharing often makes the news as an alternative financing tool buyers and sellers turn to in tough, cash- or credit-tight markets. That's because equity sharing lessens the upfront costs buyers face in any market. When buyers can buy, sellers can sell.

"In today's market, equity sharing makes sense for buyers because it allows them to buy a home which they couldn't buy on their own. Because the equity sharing an investor contributes to the down payment, the buyer needs to borrow less lowering his or her payment and risk. In exchange, the buyer gives up a portion of any home appreciation. This is a worthwhile bargain for people who would not otherwise be able to afford to buy," says Andy Sirkin, attorney/partner with Sirkin Paul Associates in San Francisco.

However, a tight market isn't mandatory.

• Equity sharing also can be strictly business -- an investment purely for financial gain, provided the investor and buyer are willing to risk they'll realize enough appreciation to make the deal pay off.

• The federal legislation points to equity sharing as a tool to help stave off foreclosure. Even without federal backing, a defaulting homeowner can privately bring in an equity share investor to buy a lump sum stake in the property or subsidize monthly payments over time, that is, pay some or all of the monthly mortgage for some period. Again, for the effort, the investor gets an equity stake.

• Equity sharing can also be used by a financially secure seller who doesn't need to drop his or her home price, but wants to move. With an investor buying an 80 percent stake, the seller could retain 20 percent ownership, and get another home. Then, say five years down the road, the seller and investor sell the home, each taking an appropriate share of the equity. Again, and always, appreciation must be sufficient for the deal to pay off.

• Some local governments offer equity sharing deals. The City of San Jose, for example, offers an equity-sharing, deferred-payment loan program for qualified, first-time, low- and moderate-income households.

The program provides housing from select, targeted properties in new housing developments.

Qualified buyer-occupants pay zero. They live mortgage-payment free. There's no down payment, no monthly payment and no interest payment, until it's time to sell or the loan is due in 45 years.

However, when the home is sold, the sale price goes to the city, which has been picking up the monthly mortgage tab. The city (in exchange for also paying the interest) and occupant share any equity gain on a prorated basis based on the terms of the mortgage (to say more here about those terms gets really involved. I'd have to give examples). If the gain is sufficient, the occupant can use it to buy his or her own home.

The occupant can also stay put for the 45-year term of the mortgage again, cost free. However, the loan is due at the end of the term, and again, any proceeds go to the city. If the occupant remains until the end of the term, the city relinquishes any and all claims on equity gains.

Either during a sale before the end of the term or at the end of the term, the occupant is not obligated to use the equity to buy a new home, but can choose to use that gain as he or she wishes.

In the past several years, San Jose has housed hundreds of families with variations of its equity sharing program.

The devil's in the details

Equity sharing is not a silver bullet.

They are most often short term contracts of five, seven, ten years or so -- to make sure the period of risk exposure is short. At the end of the term, the net proceeds from the sale are split, doled out according to contract.

Because the deal relies upon appreciation within a short term, equity sharing can be a tough sell in a depreciating market. They are perhaps better suited for a bottom market or market already on the rise.

The current market also makes the deals dicey because, as of yet, there's no federal backing.

Equity sharing is also a two-sided coin when it comes to the lender.
Risk averse lenders have put a squeeze on all credit and may not look favorably on all but the most "plain vanilla" mortgages.

On the other hand, if the investors has cash for his, say, 80 percent stake and the buyer-occupant needs a mortgage of only 20 percent of the value of the home, the lender might bite.

"Obviously if you are only going to borrow, say, a 30 percent loan (because the investor antes up 70 percent) and there are two people, you have a better chance. You are always better off if you have another person, but lenders are really spooked," said David Hofmann, a San Jose real estate attorney with Hoge Fenton Jones & Appel, Inc.

"Even people who recently qualified are having a tough time. Lenders don't want to see anyone on any loan with any credit issues. Most lenders faced with a default will just take the property back, " Hofmann added.

Equity sharing also remains obscure because the deals can be complicated.
The deals must be legal and binding contracts designed to provide an equitable means to an end. It must include provisions for any disputes or disagreements that might arise during the term. The contracts typically don't allow extracting any returns until the term is up, unless there's an escape clause. Escape clauses come with provisions that include stiff cash penalties for early outs and other resolutions.

Finally, even if the equity sharing deal is designed to create a home owner, its' underlying investment approach triggers a different set of underwriting and tax rules, compared to a conventional home buy.

Buyers will almost always need an equity sharing-experienced team -- real estate agent, attorney and tax professional -- to set up the transaction's contract.

"These deals can give some new lenders heartburn, but there is surprising interest from senior lenders who were around when shared appreciation mortgages (SAMs) were around in the 1980s," said Langholz.

Here's a list of equity sharing resources

• The HomeEquityShare.com network for home equity match ups between sellers, buyers and investors, based in Monterey, CA.

• Larkspur, CA-based Marilyn D. Sullivan's "The New Home Buying Strategy," (Venture 2000, $25.95)
equity-sharing manual.

• San Francisco, CA-based Andy Sirkin, Sirkin Paul Associates and "Basic Equity Sharing Structure" manual.

• In San Jose, CA, real estate attorney David Hofmann with the Real Estate Group at Hoge Fenton Jones & Appel, Inc.

• The Don Reedy, Peter Haglund, Howard Schwartz and Richard Borkowski BuyHalfAHouse.com team.

Also see: "Facilitating Shared Appreciation Mortgages to Prevent Housing Crashes and Affordability Crises"


© 2008 DeadlineNews.Com

Advertise on DeadlineNews.Com

Get news that really hits home for your Web site or blog from DeadlineNews.Com.
Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews Group -- DeadlineNews.Com, a real estate news and consulting service and Web site and the new Deadline Newsroom, DeadlineNews.Com's news back shop. In both cases, it's where all the news really hits home.

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

Read more!

Selling Strategies That Ease The Squeeze

To help get the housing market rolling again, you might have to get on the bus, hold an auction, lease back a model home or consider equity sharing, among the growing number of existing, new or lesser-known marketing strategies.

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - Looking to buy a bargain or make a hard sell?

Take the bus and make it the "F" Line.

The "F" is for the growing number of foreclosure properties that have become bus stops along motor tour routes designed to put home sales on the fast track.

The Keenan Carter Group in Pismo Beach, CA became the darling of the bus tour set when its version was featured on "Good Morning America" on ABC-TV and a segment with Neal Cavuto on Fox News.

At $20 a seat, the tour bus also becomes a school bus between stops, serving up information packages on each property. Riders get spreadsheets on mortgage payment options, potential rental income properties could yield and refreshments.

The special focus on marketing foreclosures is not surprising, especially in California where the number of foreclosures exceeded the number of sales in January, according to foreclosure figures from ForeclosureRadar.com and sales numbers from DataQuick Information Services.

Other bus tours are driving into Florida, Las Vegas and other hard hit housing markets that have been flooded with foreclosures.

Driving a bargain on a bus isn't new, but using the strategy as a vehicle to move foreclosures is part of a current trend in special marketing, designed to help turn the housing market around.

Auctions are hot too.

• The fastest growing segment of the auction industry's real estate sector, residential real estate auctions, on or off line, experienced a gross revenue growth of 5.3 percent from 2006 to 2007, according to the Overland Park, KS-based National Auctioneers Association. In 2007 the association created NAARealEstateAuctions.com, a real estate auction multiple listing service (MLS) to handle the volume. Many, but not all, auctions are listed there.

Coordinated open house events are big.

• In Silicon Valley, April 13 will become "The Biggest Open House Day Of The Year," as sellers queue up to offer incentives and accommodate -- on the spot -- buyers who make an offer that day.

Second home marketing is getting a renewed spin too.

• Elisabeth Miller-Fox, president of PrivateCommunities.com says little is known about "model sale lease backs," a spin on lease options typically found in master planned communities.

The tight market is giving this tactic a higher profile.

"In second home communities the developer builds a model home which is fully furnished and beautifully appointed. The developer sells the model home to a buyer who is not yet ready to have a second home, but will be in a few years. The developer then leases the model back from the buyer for 'X' amount of time and continues using the model to generate more sales for the community. It's a win-win for both parties," says Miller-Fox.

Bozeman, Montana's Black Bull Golf Community; Quechee, Vermont's Quechee Lakes; and Ocala, Florida's SummerGlen adult community are just a few communities offering model home lease back deals.

"This is a very different segment of the market and not well understood by the media or the average buyer. The National Association of Realtors (NAR) & HGTV have done a great job of helping people understand the general real estate market and how it works, but there has not been a good conduit for information for the second home buyer in a private, master-planned community. This is a very different animal and a different type of purchase," she added.

• Home shoppers should also be on the look out for some financing flash to give savings-poor but income-rich buyers an edge.

Quincy Virgilio, president elect of the Santa Clara County association, says expect to see a return to equity sharing.

The creative financing strategy includes two parties -- one who occupies the home, another, an investor, who foots the bill for the down payment.

The symbiotic relationship has flourished during past periods of buyer-seller separation in the housing market.

Las Vegas-based Creative Real Estate Online publisher, J. P. Vaughan, also a trial lawyer and real estate investor says everyone can benefit from the strategy.

One person becomes a homeowner with little if any money down, the investor, with the down payment, can get a joint venture-like return on his or her money and a seller, in a slow market, could become the investor or otherwise use the technique to quickly seal a deal, says Vaughan.

Read more creative buying, selling and financing stories.

Advertise on DeadlineNews.Com
© 2008 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

Read more!

Ins, Outs Of Equity Sharing

The symbiotic relationship spawned by equity sharing requires a nurturing housing market and a well-orchestrated contract if it is to evolve into an American Dream.

by Broderick Perkins
© 2008 DeadlineNews.Com

Deadline Newsroom - Consider equity sharing a symbiotic relationship -- as well as a legal agreement -- between two or more people holding title to one home.

Las Vegas-based Creative Real Estate Online publisher, J. P. Vaughan, also a trial lawyer and real estate investor says, properly designed, the creative financing strategy can be a triple-win proposition.

An equity sharing deal is typically struck help sell a home, often in a tough market, but a tough market isn't a prerequisite. It also helps enable a home purchase when it might not otherwise be possible. And it is used to provide an investment with a financial return.

• Typically savings-poor, but income-rich, one person becomes the occupying homeowner with no or little money down.

• A second participant, the investor, provides the initial leverage usually in the form of a down payment stake. With time, he or she can enjoy a joint venture-like return on his or her money.

• The seller, in a slow market, can choose to become the investor or otherwise use the creative financing strategy to quickly seal a deal.

Deals vary, but in its simplest form, an equity sharing agreement works something like this:

• The buyer-occupant generally lives in the residence, pays the mortgage and other costs associated with owning and operating a home -- including taxes, insurance, maintenance and the like. He or she gets to deduct a portion of the mortgage interest, property taxes and others.

• The non-resident, often an investor, perhaps a family member, trusted friend or professional investor, provides all or part of the down payment, and in return gets tax deductions for her or his share of the mortgage interest and property taxes.

• Title to the home can be held in a variety of ways -- joint tenancy with right of survivorship, tenancy in common, partnership or as a living trust.

Equity sharing deals should be legal and binding contracts designed to provide an equitable means to an end. It should also include provisions for any disputes or disagreements that might arise during its term.

Contracts generally indicate that the parties cannot extract any returns until the deal is over. Escape clauses can come with stipulations providing for cash penalties for early outs or other resolutions.

At the end of some specified period, five, seven, ten years or so, the net proceeds from the sale are split between the buyer and investor, again, based on contractual provisions.

Generally and theoretically, through appreciation, an equity deal is set so that the occupant eventually earns a share sufficient to allow him or her to buy a home without help and to give the supporting investor a shot at a profit. Other resolutions can be contracted.

The creative financing tool isn't perfect for every market. While tight money markets can make equity sharing a viable financial avenue to homeownership, a market with flat or reverse home prices requires a deftly drawn contract with a term long enough to allow the deal to gel.

As is the case with any major financial transaction, assistance from a professional experienced in equity sharing agreements is paramount. In addition to the transactional contractual considerations, tax implications abound.

Entering an equity sharing deal with a verbal agreement and or non-binding contract is like searching for fools gold without a pickax.

Referrals from trusted resources -- real estate agents, tax professionals, accountants, other finance experts, and the like, are good resources to tap. Most professionals have a network of peers involved in various aspects of real estate.

The Internet's vast reach can also help make it easy to find qualified help. Keep in mind, the Internet is no better than the Yellow Pages if you don't thoroughly check out professionals' credentials, experience and track record for success.

A few resources include:

• Marilyn D. Sullivan's Home Equity Share network.
• J. P. Vaughan's Creative Real Estate Online.
• The Don Reedy, Peter Haglund, Howard Schwartz and Richard Borkowski BuyHalfAHouse.com team.
• The DirtLawyer.com team at Hoge Fenton Jones & Appel, Inc.
• Andy Sirkin's Sirkin Paul Associates.

Advertise on DeadlineNews.Com
© 2008 DeadlineNews.Com

Broderick Perkins, an award-winning consumer journalist of 30 years, is publisher and executive editor of San Jose, CA-based DeadlineNews.Com, a real estate news and consulting service, and the new Deadline Newsroom, DeadlineNews.Com's new backshop. In both cases, it's where all the news really hits home.

---

DeadlineNews.Com's Editorial Content Is Intellectual Property • Unauthorized Use Is A Federal Crime

Read more!