REX Agreements Benefit Homeowners

and Real Estate Investors Alike

Until now, the most common means of extracting cash from owner-occupied homes has been to take out a home equity loan or a second trust deed. Both come with ongoing payments of principal and interest. But a new financial product – the REX Agreement – provides instant cash without any requirement for making payments. Moreover, out-of-pocket expenses are minimal (if any). This can be a godsend for homeowners with some equity who need to pull cash out of their homes without increasing their monthly financial burden.

Available in nine states (California, Colorado, Florida, Illinois, New York, New Jersey, North Carolina, Virginia, Washington), REX Agreements use a real estate purchase option which allows homeowners to receive an initial payment of cash in exchange for giving up part of the value of their home at a future sale (which can be up to 50 years down the road). If a home increases in value, the purchase option is exercised at the time of sale and an agreed percentage of the profit is paid to the holders of the purchase option. The homeowner also receives the balance of the purchase option price at the close of sale. If the home loses value and the purchase option is not exercised, no payback of the purchase option advance is necessary. In other words, REX Agreements share the market risk with the homeowner. And advances on the purchase option are not taxable until the option is exercised (typically at the time the home is sold)!

REX Agreements are carefully calibrated and backed by real estate appraisals which define the market value at the specific time an Agreement is initiated. Minimal loan-to-value ratio is 75 percent. A purchase option for a portion of that value (10 to 50 percent) is negotiated and the homeowner receives part of the option price as advance payment. So, homeowners who qualify enjoy instant use of cash that would not otherwise be accessible.

A REX Agreement can be the perfect answer for homeowners suffering from cash shortfalls or unexpected expenses who would not otherwise qualify for traditional lender remedies. It is also a great alternative to home equity loans for those who need additional income but do not want the burden of increased monthly payments.

The need for extra cash can pop up from anywhere. Suppose a homeowner is faced with an unexpected expense, such as a major medical issue. Rather than having to sell their home, a REX Agreement allows them to leverage this asset to get cash now without increasing their monthly bills. Many homeowners also use this financial instrument to get cash for their kids’ education or to start a business.

Another not so obvious application of REX Agreements has been discovered by older Baby Boomers. It can be used to create bridge income that allows them to postpone taking Social Security until their monthly benefits are higher. For example, at age 62 a person’s monthly social security benefit might be just $1,200. But, if they can postpone tapping into Social Security, the monthly amount increases by eight percent annually. Thus, they would receive 40 percent more, or $1,680 monthly at age 67. Meanwhile, they supplemented their income with a REX Agreement without increasing their monthly financial burden.

A REX Agreement are not for everyone, but they can the right answer for homeowners faced with cash needs or monthly income shortfalls. It offers a practical alternative to home equity loans. Learn more at Rex Agreement News and Resources.