Friday, March 20, 2009

French Home-Equity Deals

Madeleine Schlosser sold her Paris home in a viager deal last year. The terms of the sale allow Ms. Schlosser to live in the apartment until she dies, and she says the money has allowed her to live more comfortably.

Madeleine Schlosser needed more cash, so last year, at age 82, she sold her Paris home.

That may sound like a risky decision. But the sale terms allow Ms. Schlosser to live in her apartment until she dies. The two buyers paid her 18% of the property's market value up front, and now pay her a monthly pension. With the money, Ms. Schlosser has financed costly dental work and says she can "live more properly."

The buyers will eventually take possession of an apartment for which they paid less than the market price -- unless Ms. Schlosser lives for many more years.

Reading this, I was reminded of an incident in Arles that I read about quite a number of years ago; it is mentioned in this article.

A troubling aspect is that buying a property like this amounts to betting that someone won't live beyond a certain age. If they do, the buyer loses out. In one famous case, a Frenchwoman called Jeanne Calment, then age 90, sold her house in 1965 in a viager arrangement to a middle-age acquaintance. Thirty years later, he died; she turned 120. His children kept paying her monthly pension until she died, at age 122, believed to be the world's oldest person.

The flat overlooked the town square where Van Gogh had painted. I found the article from the Times in 1995 (A 120-Year Lease on Life Outlasts Apartment Heir).

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