The Real Estate Scheme That Bets on Death
WHY YOU SHOULD CARE
Because who doesn’t love to bet on themselves?
By Fiona Zublin
It’s the ultimate in security: a home of one’s own. When you live in a ravishing but expensive city like Paris, you grow accustomed to the idea that you’ll never own more than a few square meters, if that. Is it even possible to own a piece of Paris? you may be wondering as you click on real estate listings asking for millions of euros for a few rooms in a building without an eleveator and with only a partial view of the Eiffel Tower. Or are we all just passing through?
But there is another option — a decidedly insecure one. And while it’s peculiarly French, it could be a solution to overpriced housing anywhere for those who don’t mind betting on … well, betting on when an elderly individual is going to die.
The practice is ancient.…
It’s called en viager — think of it as a reverse mortgage. Here’s how it works: Instead of buying an apartment and moving into it, you buy an apartment owned and occupied by an elderly person. Based on the apartment owner’s age and life expectancy, and the value of the place, you calculate a bouquet — a lump sum paid to the owner — and agree to pay a set amount per month. Until the owner dies. If that’s tomorrow, lucky you. If the owner outlives you, your survivors — spouse, children, even grandchildren — must continue paying the monthly amount until she or he finally dies.
The practice is ancient, with roots in ninth-century France, and possibly even earlier, says Erik Bobbink, a financial consultant with expertise in viager. The process was intended to provide the elderly with a little extra cash. Now, though, Bobbink says, seniors can use the internet — meaning comparison shopping and pricing are more transparent. France sees about 5,000 viager transactions per year, or about 1 percent of the real estate market. With pensions getting smaller, property ownership common among the 70-and-older population, and two million retirees living in the Paris metropolitan area alone, Bobbink expects the system to become more popular.
Of course, sometimes you lose. In the mid-1990s, newspapers were full of the story of Jeanne Calment, who lived to the age of 122 … outliving her viager buyer by two years. She recouped more than twice the property’s market value. There may well be other losers, including the children who thought they’d inherit their mother’s city flat only to find upon her death that there was a new owner.
Buying en viager is not only a way for older people to support themselves in retirement but also a way to get on the property ladder for way less — maybe — than market value, to provide a place for your own retirement and to satisfy the oh-so-American dream of getting a good deal and beating the system.
Oui or non? Tell us what you think in the comments section below.