Definition and understanding of deals related to Viagra

What is a "viager"? "Viager" is a real estate deal popular in France, where the buyer pays a deposit, and then makes a series of payments until the seller passes away.

Main findings

"Viager" is a real estate deal popular in France, where the buyer pays a deposit and then makes a series of payments until the seller's death. Sellers are often widows or widowers who need a stable source of income after their spouse's death. Viager offers buyers the opportunity to purchase property at reduced rates.

What is a "viager" really?

It is significant that a "viager" is a reverse annuity. For home buyers, a viager represents a risk, while for sellers, it is a guarantee of regular payments. A "viager" is sometimes referred to as a reverse mortgage or a charitable remainder trust. In a viager agreement, a person agrees to sell their property to a buyer in exchange for a deposit, known in France as a "bouquet," and regular benefits for the rest of their life. Additionally, the seller continues to live in the house until the end of their life. Only after the seller's death can the buyer take possession of the property. Essentially, the viager buyer is betting on the seller's life expectancy. In France, two private parties often negotiate a viager with the help of a lawyer, without the involvement of banks or insurance companies. The deal can potentially benefit both parties.

For example, sellers receive significant tax advantages. Moreover, the monetary payments are highly guaranteed. If the buyer fails to meet their obligations, the seller retains the deposit, all monthly payments made up to that point, and ownership of the property. Sellers are often widows or widowers who need a stable source of income after the death of a spouse. For buyers, a viager offers the opportunity to purchase property at reduced rates. The viager uses the occupied value rather than the market value, which is often much higher. Additionally, buyers do not pay interest on the property, and if the seller dies sooner than expected, buyers receive an even greater discount. The risk lies in the possibility that the seller may live longer than anticipated, in which case the buyer has to pay more. A typical viager buyer is a middle-aged person looking to secure housing for retirement.

Calculation of the viager

The value of real estate in a viager is calculated based on the seller's age and is known as the occupied value. The occupied value of a house owned by a 50-year-old will be higher than that of a 70-year-old. The deposit is typically around 30% of the occupied value. Participants calculate cash payments based on the average life expectancy of the seller. Due to these guidelines, very elderly sellers often find it more advantageous to sell their property and receive the full market value.