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| Summary / Description | The arrangement we envisage is a limited partnership agreement with the purchasing household as the managing partner and the financial institution as the limited partner. In the simplest such form of contract, ownership of the property would be divided in fixed proportions between the household and the financial institution. |
| Type of Prior Art | Print Publication |
| Publication Title * | |
| Author | Andrew Caplin, Charles Freeman, Joseph Tracy |
| ISBN | |
| Page Range | |
| Medium | Other printed publication |
| Publication Date * | October 1, 1994 |
| URL | http://app.cul.columbia.edu:808... |
| Notes | |
Excerpt The essential idea of a housing market partnership is to introduce a new source of funds topotential home owners. In a partnership contract, the house would be co-owned by the occupying household and the partner financial institution, both of whom would be present at the closing and who would co-sign the title document. The partnership contract would give the household full rights to occupancy in the house, and would also specify the household's role as managing partner in the partnership. As managing partner, they would be responsible for maintaining the home in good condition. They would also pay all running expenses such as local taxes for the period of their occupancy. The managing partner would also have the primary rights in determining any additions to the property, with proper notification of the limited partner, and would be able to obtain appropriate adjustments in the terms of the partnership for the increase in value, as specified in the initial contract. Finally, the managing partner would have the right to determine when the house was to be sold, and would also be in a position to accept an offer for the house at any point that they wished, provided they followed the contractual steps which allow the limited partner to exercise a right of first refusal (to prevent "fire sales"). As limited partner, the financial institution would then take a background role. After supplying the initial funds, its role would be to monitor the managing partner's compliance with the contract terms. The most important time for checking compliance would be during the sales process of the house, or at times of major adjustment of the property, which are carried out at the discretion of the managing partner. When the sales process has been completed, the managing partner will split the price net of the contractually specified closing costs in accordance with the percentage ownership interests specified in the partnership contract. |
A method for financing real estate employing a shared appreciation mortgage, comprising the steps of: a customer seeking approval from a lender for the purchase of a real estate property at a price; after approval the customer entering into a main contract for the purchase of the property; the customer obtaining a loan from the lender, secured by a mortgage over the property, to purchase the property, the loan containing a first loan and a second loan, where the first loan is a conventional principal and interest loan arrangement, and the second loan is an interest only loan where the interest rate is related to the rate of rental return from real estate properties of the value of the second loan; the customer and lender entering a residential purchase contract containing an obligation for the lender to pay to the customer an amount equal to the outstanding second loan immediately before the property is sold in order to purchase an interest in the property proportional to the value of the outstanding second loan relative to the original purchase price of the property, so that the lender and customer jointly own the property at the time of sale; and, the customer having an obligation to repay the outstanding part of the first loan and the outstanding part of the second loan upon the sale of the property; wherein, the size of the second loan is periodically reviewed.
| Relevance | "Managing partner" (prior art) = "customer" (Claim 1) "limited partner" (prior art) = lending institution Paper treats mortgagor and "limited partner" as two entities; claim treats them as same entity |
United States