Run fast. He can file a note or do all kinds of things that will compromise your equity and can put you in foreclosure risk.

No.

Tni LeBlanc, JD, MA, e-PRO
http://www.SantaMariaRealEstateBlog.com

Equity sharing means that the investor will have an interest in your home; s/he will own a portion of your home. This may be a way for you to get into a home but, as everyone else has mentioned, you do need to protect your interests. An attorney could help you with forming the verbiage in the contract so that both you and the investor understand exactly how your arrangement is structured. The investor will want their money, with a return on their investment, at some point. So, the two of you need to determine when he wants how much. Will you live in the home for X number of years and then, when you sell, split the proceeds with him?
If he puts 20% down, he will have 20% equity in the home immediately while you will have none. Have your mortgage consultant show you how much of your monthly mortgage payment goes toward principal and how much toward interest in the first 3 years of your mortgage. This will give you a little better idea of what you're getting into. It may be a good arrangement for you but think carefully before making a commitment and find out all of the details before making a decision. Good luck to you, Mark.

Equity sharing requires at least two parties, the investor and the owner-occupant. The investor should, of course, have the funds needed to close the purchase of the property, and to pay any other agreed amounts. He or she should also have additional funds available, if needed, in the event the owner-occupant does not perform as agreed and defaults on some or all obligations. The owner-occupant typically does not have the financial resources to make the down payment on the property or to qualify for a mortgage loan. Depending upon how the relationship is structured, both parties could have tax benefits and the potential of gain when the property is sold.

Please consult with an attorney before entering into an equity sharing arrangement because there are so many things you need to understand before agreeing to it's terms. I bet we will be seeing more and more of these types of arrangements in the future. Tough times call for creative measures. You just want to be careful. Good luck!

I do have a whole write up on equity sharing if you are interested in more information prior to an appointment with an attorney. Happy to help.

Diane Wheatley, Broker
diane@moveupproperties.com

It can be. Make sure you understand the expectations fully. In that you use the term "investor" I gather it is not someone with whom you have a close relationship? It is my goal that we will be able to put up 10% towards a down payment for each of our children, matching their own contribution.... and we'd consider that an "investment"... although we'd structure it to share the increase in equity when they sell or are ready to "buy us out", quite honestly, I hope we'd never need the money back from them. We have 4 kids, so there's no way to know what our future holds. THAT will be a GREAT way for my kids to become homeowners. However, if your deal is with some random person that you know - make sure you understand what's in it for them.