Cash In Some Home Equity with a Rex Agreement

Posted by 29 June, 2012

Owning your own home has many different benefits. One of the greatest benefits is being able to use the equity that is in your home. The traditional ways of doing this was through a loan. Can you guess what the loan is called? It is called a home equity loan. There are also reverse mortgages that will allow a person to tap into that money that is sitting in equity. There is a newer, easier way for homeowners to dip into their home equity, and it is being called “The Rex Agreement.” While the name might sound prehistoric, this legal agreement is quite the opposite. Currently nine states have jumped on board, and are offering The Rex Agreement.

What is the Rex Agreement?
This is the question that everyone wants an answer to. The Rex agreement can be a little complicated, so put on your thinking caps and get ready to decipher this new way to tap into a home’s equity. The Rex agreement is four legal binding documents. Each state will have a slightly different version, but the main principal remains the same. Here are the four documents that make up the Rex Agreement: Option agreement, Covenant Agreement, Recorded memorandum of option, and the final document is a recorded security agreement. See, that wasn’t so tough, was it?

Let’s keep things simple for just a second. The Rex agreement is when Rex & Co. purchase a percentage of your home. This percentage can range from 10% to 50%. Under the agreement you will be paid money in exchange for this ownership. When the house is sold, then Rex & Co. will get a percentage of the sale that is equal to their current owned percentage. As a homeowner, the money that they receive in exchange for the partial ownership does not have to be repaid. Putting it that way makes it a lot easier to understand.

How much money does a homeowner get?
That is where it starts to get a little tricky again. The homeowner will get three separate payments based on the four documents of The Rex Agreement. The first payment is a 0.5% portion of The Option Exercise Price. The Option Exercise price is the price that was agreed for the percentage of the home that Rex & Co are willing to buy. The second payment is a flat fee of $1000.00. This is known as the covenant fee. The third payment is a large down payment based on the Option Exercise Price. The amount varies, but it is usually around 10-30%. That still leaves the balance of the Option Exercise Price. The remaining balance is paid off when and if a predefined set of circumstances has been met. Generally the final portion of the Option Exercise Price is paid when the house is sold.

This somewhat new agreement can be an excellent way for homeowners to take advantage of their current home equity without having to go through any sort of loan or borrowing process. The Rex Agreement can be one component of your plan for retirement.

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