Anybody heard of unison homeowner / homebuyer funding?

[Vinay H.]

I received a flyer from unison. They claim they will help fund 10% of downpayment. This is not a loan but a co-investment. They charge no interest but they share in 35% of the proceeds of any appreciation for home buying.

Their example - if purchase price is 500k, they provide up to 50k for downpayment. If the sales price is 600k, their proceed is 50k + 35% of the 100k appreciation. If the sales price is 400k, they take a 35% share of the loss.

Any thoughts? Any questions I should ask.

Pros I can see - a) No interest payments - improves cash flow

b) In case of home value loss, they share in loss

c) This does not show up as debt? in my income to debt ratio?

Cons:

a) what is the catch?

b) what if I want to opt out or sell for a price that is lower than what they appraise for ...?

"

We provide down payment funds that you can use for up to 30 years1 with no interest charges or monthly payments. In exchange we share in the change in value of your home – up or down – when you decide to sell2. Our share of the change in value is typically 35%. If your home’s value increases, we both profit as partners. If your home’s value decreases, we also typically take a portion of the loss. It is a true partnership – we win and lose together."

[Vinay H.]

Intersresting @Sendhil Krishnan

I was not aware there were other companies doing this. To me, whenever exotic instruments pop up and start to gain steam, it means the end.crash is near. Remember when mortgage CDO started becoming the investment product that Goldman Sachs started selling to investors in 2005 lol?

In any case, my cons are as follows:

a) Unison and I assume others charge an origination fee - currently 4%. So they do make money upfront as well

b) There is some language that you cannot sell earlier than 3 years after unison loan. So it is like a little bit of a lock? What happens if you need to?

c) What if you do renovations to the property - does unison share in the gain due to this?

d) What if you sell for less than what Unison has appraised? Suppose they appraise your house at 500k and you are eager to accept a quick cash offer for 480k? Does unison allow this or they will come after you for the 20k unrealized gain?

e) What kind of lien does Unison take. If you have a first mortgage and home equity, they take 1st and 2nd position? Will unison take 3rd?