Home : Real Estate Exchange Agreements: Heard of the REX?

Real Estate Exchange Agreements: Heard of the REX?

Posted by Brett Carman on 9/24/2008 at 2:09 PM
Posted in Real Estate

The REX Agreement (or Real Estate Exchange Agreement) is a way for a homeowner to “tap” into their existing home’s equity without incurring any monthly payments or interest charges. A home owner can do this by agreeing to share a portion of the home’s increase or decrease in value over a period of time.

It acts as a leveraging tool: A homeowner who has equity in their home can get an “advance” of a portion of that equity with no out of pocket charges and no new debt service. The home owner gets a few options as to how much they wish to share in the future gains or losses and usually can get an advance of about 10-15% of the value upfront. The REX Agreement gets filed as a lien against the property and can last as long as 50 years.

A home owner can use the money for whatever they wish: A down payment on a 2^nd home, home improvement, college tuition, or major medical bills. It can also be used to hedge against declining home markets since REX shares the loss of equity on a bona fide sale.

This agreement is a useful tool in certain circumstances. But it’s probably a bad bet in areas of high appreciation. Also, over time REX Agreements could be the target for adverse selection in portfolio allocation. Visit www.rexagreement.com to learn more or to find out if your state participates.

Brett Carman is a seasoned veteran in the real estate industry for over 17 years. He holds active licenses in real estate, mortgage finance, and property & casualty insurance. Offering a one-stop shop for his residential and commercial clients, he strives to not only educate, but streamline the real estate acquisition process. With a long and proven track record of success, he is uniquely qualified and has a passion for helping people achieve their goals in real estate.

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4 Comments

Posted by Business 2000 Foundation.com on 09/26/2008 7:46 AM

We are wondering if a business could tap financially into their buildings...as you out-lined with homes?
Are there any?

Posted by Brett Carman

on 10/01/2008 12:47 AM

Sure are! As an owner of commercial real estate, you could certainly borrow some of its equity.

Posted by member1641739 on 10/08/2008 8:52 PM

I have a home in Miami that I've been trying to sell since Aug. 07. Of course, with the current market conditions, especially in Miami, I've had no luck. I have a house in Georgia that I am dying to move to. The living expenses are much more reasonable and affordable than they are in MIA. Does anyone know of a Lease/option with a large downpayment to get things started with my house? How does that work??? I've tried renting with no luck.

Posted by Brett Carman

on 10/21/2008 10:31 AM

@ Miami:

It's a great market to use financing options to sell your Miami property! You could owner finance if you own the property outright. To sell the property with an existing loan usually requires the loan to be paid off as a provision of your deed of trust. You could also offer a lease option with a large non-refundable deposit to be credited as earnest money when the tenant can effect a purchase contract with their own financing. Agree to the price in advance with a separate purchase contract containing a closing date on or before the expiration of the lease. This gives you the option to allow them to close earlier or later upon your written approval.

Brett Carman

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