There have been several threads started here by folks asking questions about Unison but no responses from anyone that’s actually used the program. Just closed a deal in Brooklyn representing buyers using the Unison Home Buyer program and figured I’d share the experience.
Unison is a real estate equity sharing investment company. There are several similar companies but Unison is the largest and has been around the longest. Basically, they will provide a portion of the down payment in exchange for a percentage of future appreciation. If prices go down they will also share in a loss. Because they are co-investing and it’s not a loan, there are no additional principal or interest payments, so their contribution doesn’t affect your monthly payment or debt-to-income. Unison gets 3.5% of future appreciation for every 1% of down payment they provide and they will provide up to 20%. They also take a transaction fee of 2.5% of the amount they provide at closing. NYC buyers will also have to pay 1.8% mortgage recording tax on the Unison down payment amount (even though it’s not a mortgage). If prices go up a lot they could make out with up to 70% of the appreciation (if you do the max 20% down payment). The most they’ll invest is 500k. If prices go down a lot they could lose the entire amount of their contribution. They take a second lien position to cover their co-investment.
They will only invest in owner occupied SFH, condo, or two family (so you can house hack). They will not invest in 3-4 family, co-op, or land lease. They won't give you credit for capital improvements made within the first 3 years and so you can't really flip. After 3 years you can get a renovation adjustment so you get credit for improvements. They work in 30 states but each specific address must be approved through their local lender partners. Approval happens pretty quickly. Not sure how they do it but I'd guess it's by zip code, ppsf, and number of rooms. All the addresses I've sent them in Manhattan and Brooklyn were approved and I'm guessing you'll have a much easier time in high appreciation areas. If you sell within the first 3 years Unison will not share in any loss. You can sell anytime after that but the program only runs for 30 years and if you don't sell by then you must pay them back their initial investment plus the share of the appreciation (based off an appraisal).
The program and all underwriting is done through local lenders that have partnered with Unison. They have two that work in NYC (a fairly large regional bank, and a well known mortgage broker). Each lender has a specific loan officer that specializes in working with Unison and you have to work with that person. As long as Unison approves the address, and the buyer and property pass underwriting by the lender, then Unison will co-invest. The process was very smooth and not much different than the typical sale. You do have to educate everyone involved as most are initially skeptical (selling agent, seller, buyer attorney, seller attorney, etc). In a competitive bidding situation I can see where an offer that includes Unison could put a buyer at a disadvantage just because no one’s ever heard of it.
My clients bought a 2 family in Brooklyn. They put down 10% and Unison contributed over 300k. My clients would not have been able to buy this particular house without Unison as their debt-to-income with just 10% down would have been slightly too high to get a mortgage and they didn’t have enough liquid to increase the down payment to move the needle and certainly not another 300k. The contribution from Unison also improves the cash flow on the rental unit by quite a bit, and they don’t have to share any of the rental income with Unison. In the end, the Unison investment made the house much more affordable for them and gets them much better rental income. In return they are giving up a huge percentage of future appreciation but my clients feel the market is at a peak in this part of Brooklyn, with slow to no appreciation for the foreseeable future, and so they’re fine with the large split. This program is definitely not for everyone but it can work really well for those that aren’t that liquid or don’t want to increase their debt.
Let me know if you have any specific questions and I’ll do my best to answer. Please feel free to PM.
