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What Is a Viager?
Let me explain what a viager is directly to you: it's a real estate transaction that's common in France, where you as the buyer make an initial down payment and then continue with a series of payments for as long as the seller remains alive.
Key Takeaways
You should know that a viager functions as that French real estate deal with the down payment and ongoing payments tied to the seller's lifespan. Sellers in these arrangements are frequently widows or widowers seeking steady income after losing a spouse. For you as a buyer, the appeal lies in acquiring a home at lower rates than standard market prices.
Understanding Viager
At its core, a viager operates like a reverse annuity, and I want you to understand it as a gamble for buyers but a source of secure, regular cash for sellers. It's also referred to as a reverse annuity mortgage or charitable remainder trust in some contexts.
In this setup, the seller agrees to transfer their property to you in return for a down payment—called the 'bouquet' in France—and consistent cash payments for the rest of their life. Importantly, the seller stays in the home until they pass away, at which point you can fully take possession. Essentially, you're betting on how long the seller will live.
These deals in France are typically negotiated between two private parties with a lawyer's assistance, without involving banks or insurers. It can work out well for both sides: sellers get notable tax advantages, and payments are highly secure—if you default as the buyer, the seller keeps the down payment, all prior payments, and the property itself. Sellers are often those widows or widowers needing reliable income post-spouse's death.
As a buyer, you're drawn to viagers for the chance to buy a home at reduced costs, using the occupied value instead of the higher market value. You pay no interest, and if the seller dies sooner than expected, you score an even better deal. The downside is if they live longer, your total payments increase. Usually, buyers are middle-aged individuals planning for a retirement home.
Viager Calculation
When calculating a viager, the property's value is based on the seller's age, termed the occupied value. For instance, a home owned by a 50-year-old has a higher occupied value than one owned by a 70-year-old. The down payment typically comes in at about 30% of this occupied value. You figure out the ongoing installments using the seller's average life expectancy. Given these factors, very elderly sellers might fare better by selling outright for full market value instead.
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