Is there a US equivalent to the "vente en viager" real estate strategy used in France?

[Paul Hector]

In France one way that people regularly acquire real estate is through something called a "vente en viager", which translates in English to "sale by a viager". Here is how it works:

This type of transaction allows a person to sell a property they own, benefit from the equity they have built up in the property and receive a monthly cash inflow from the buyer until they die. Most sellers are usually above 70, 80 or even 90 years old. Their properties are mortgage free but they are not able to obtain a HELOC from a bank. This type of sale allows them to get a lumpsum - perhaps to do all the trips on their bucket list - and then supplement their pensions which they may have started to receive 20 years or more ago and are no longer adequate for today's costs.

Basically the purchase consists of two parts: a "bouquet" or an upfront lumpsum that may be anywhere from 15% to maybe 50% of the property value and a monthly or annual payment (called a rent) that continues until the owner dies. The seller is responsible for continuing to maintain the property.

For the buyer, this allows them to purchase a property potentially for significantly less than the market, they may also benefit from market appreciation. But the success of the strategy depend on how long the seller lives as the risk is that they could end up paying more than the property is worth.

There is one famous story, perhaps an urban legend, of an investor who purchased a viager from a 90 year old woman who apparently lived to past 120 years old. The buyer died before the seller so his estate had to continue paying the monthly rents.

In some ways this type of sale is a bit like seller financing, except that the seller continues to live in the house and there is also no 'fixed' sale price.

Have you ever heard of anything like this in the USA?

What are you thoughts on this type of approach?

[Roy N.]

Salut Paul:

Un viager en anglais c'est un "{life} annuity".

In the U.S.A and Canada, there are a similar vehicles, commonly referred to as a "reverse mortgages" and "life estates."

We did something similar with an elderly gentleman (he was 92 or 93 at the time) who had a little house on a desirable parcel of land in the City. We simply bought his property and told him he could remain there rent-free (he pays all utilities) for the remainder of his days. He'll be 96 this year and is still living alone in the house.