Do you know what the Viager contract is all about? Not many people are aware of this kind of tax collection because it doesn’t function across every part of the globe.
In the old French language word “viage”, meaning “duration of life”.
What is the Viager system in France?
Viager represents real estate transactions in France where the buyer pays the upfront payment to the seller (“bouquet viager”). The Seller has the right to live in the property for the remainder of her or his life while the buyer gets the property on the death of the seller.
A rather uncommon kind of transaction related to real estate, Viager is highly popular in France. It is only collected when the buyer pays his first booking amount, i.e., the down payment, followed by the installments for as long as the seller of the property is alive. In a way, it is highly beneficial for sellers as it provides them consistent cash payments along with the added advantage of the security, while for buyers, it is more of a gamble. Viager is more of a reverse annuity, a mortgage that is more like a charitable remainder trust.
How Does Viager Work in France?
Viager works in France in the following way:
- The buyer wants to buy a property where old people live or widows.
- The buyer pays to a seller a lump sum (all at once payment) usually around 30% of the value of the property.
- The seller has the right to live in the property for the remainder of his life (her life).
- The buyer will get the property after the death of the seller.
When such an agreement is drawn, the seller is ready to sell the property to the buyer after a “bouquet,” i.e., a down payment, and get the rest of the money in installments for the rest of their lives. Along with that, the selling personnel also get to live in that house for as long as they’re alive. Only after their death, does the buyer get access and hold of the property.
Such contracts are mostly negotiated in the presence of a lawyer and don’t include any insurance companies or banks. Mostly, you’ll find widows getting into this agreement who are looking for a constant source of income after the death of their partner. There are also a lot of advantages of this contract, as the seller is secure in terms of payments, and they also get tax breaks from time to time.
Just in case the buyer fails to give the further installments or fails at any moment, the seller gets to keep the down payment, the number of installments paid until then, as well access to the house. Not only sellers, but buyers greatly benefit too! For example, buying a viager apartment will help them have a home at nominal rates. Such agreements function on the occupied value, which is mostly higher than the regularly ongoing market value.
Another reason why it’s a great deal is that there is no additional rate of interest included on the property they’re willing to purchase. In case the seller faces death sooner, the discount on the property gets bigger, the only risk is the fact that if the seller tends to live longer, then the buyer would have to pay more than expected. Mostly, you’ll find middle-aged people getting into viager agreements in order to secure a retirement home.
Calculating the Viager
When it comes to the ‘viager calculator’, know that it is summed up considering the seller’s age, which is known as occupied value. For instance, the value would be more if they’re just 45 years old, and lesser if they’re somewhere around 65. When the buyer has to pay the down payment, it should be at least 30% of the occupied value to attain the house under their name after the seller’s death.
Furthermore, based on the life expectancy of a seller, the cash installments are determined after calculation. As these points are existing under the guidelines, an old seller is better considering the fact that they too will receive the market value in full.
He is an expert in financial niche, long-term trading, and weekly technical levels.
The primary field of Igor's research is the application of machine learning in algorithmic trading.
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