DThe German financial regulator Bafin warns against partial sale models of real estate, which are often aimed at older people with the promise of financial freedom. “Partial sales are touted as quick, easy and safe for life. In fact, partial sales do not keep a lot of what the advertising promises, ”explained the Bafin on Friday.
In a partial sale, homeowners sell up to 50 percent of their property to a company. At the same time, they authorize the latter to sell the property later – at the latest in the event of death. The property can be lived in or rented out until the entire sale. A special right of use, usually a usufruct, is granted for this. The previous owners have to pay a monthly user fee for use.
Many disadvantages only became apparent later, for example when the house or apartment is actually sold to a third party, according to the Bafin. “A real estate partial sale is rarely the best solution for house or apartment owners,” said Executive Director Thorsten Pötzsch. “It’s risky and can get expensive.” From a consumer protection point of view, he could only warn against “blindly trusting the ubiquitous advertising promises for real estate partial sales”.
“Even for a lawyer it will be difficult”
Providers such as Deutsche Teilkauf, Hausanker, Heimkapital or Engel & Völkers advertise with partial sale models. With the money raised – in some cases a six-figure sum – owners could afford long-cherished wishes such as long trips, a mobile home, the conversion of the house to suit seniors, necessary renovations or simply a higher standard of living, it is said. At the same time, they retained control of their property right through to its repurchase.
As a rule, providers are aimed at seniors, some with a low pension, whose old-age provision is in their own property, explained Katharina Lawrence, a lawyer at the consumer advice center in Hesse. However, the contracts of the models are very complex and difficult to penetrate. “Even for a lawyer it will be difficult.”
From Bafin’s point of view, there are a number of pitfalls in the models. A high partial purchase price sounds tempting, but this is what the monthly usage fee and the minimum revenue and all fees for the overall sale are based on. But after a partial sale, the running costs of a property continued to accrue. The part-purchase company also always gets at least the part purchase price “plus X” for its part of the property when it is sold or bought back, even if the property has not increased in value.
In addition, the Bafin warns of a high and “sometimes unpredictable” monthly usage fee. “With a usage fee of, for example, five percent of the partial purchase price per year, the partial purchase price received will be used up in twenty years.” The fee is usually fixed for a certain period of time, around ten years – the longer, the more. After that there could be an increase. Anyone who can no longer pay the monthly usage fee is threatened with the sale of the house and moving out.