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The life is to buy a property by paying a portion of its capital price and the rest as an annuity throughout the life of the seller. At the time of purchase, we do not know what it will cost in total.

Tips before buying a life annuity

The life: a random operation

By nature, the life annuity is a random contract. The buyer has a chance of gain and a risk of loss. If the seller dies quickly, the buyer will have paid the property below its real value. The scenario will be the opposite, if it breaks records longevity. Like any real estate purchase, the life annuity requires obligatorily to pass in front of notary.

Spoiled for choice

Retirees are increasingly likely to consider selling their main home life annuity to supplement their retirement. According to the specialists of the life, 12,000 goods would be to sell as well as the number of life annuities oscillates between 4000 and 5000 per year!

Choose a busy or free life annuity

In the vast majority of cases, property is sold in life annuity. The seller reserves the right to stay in his house until the end of his life.
If he comes to leave the premises, to go to retirement home for example, he can not give the property for rent. He has a right of use and occupation over the property, nothing more.
However, the purchaser can not dispose freely... unless it is provided in the deed of sale. A clause may specify that in case of early departure of the seller, the buyer may take possession of the housing to occupy, rent or sell. In return, he will pay a supplementary pension defined in the deed.
Given these terms, the life annuity can be used to build a real estate to later complete a retirement for example.
On the other hand, to buy one's main residence, it is better to bet on the free life, unfortunately very minority. The offers mainly concern small areas bought for renting and an additional income. It will pay the seller a much higher annuity than in the life annuity.

Who pays what in a life annuity?

As part of a busy life, the occupant of the premises takes care of maintenance work, minor repairs and the tax of housing as would a tenant.
Major repairs and property taxes are paid by the new owner.
But it is possible to provide a different distribution in the deed of sale.
With a free life, the buyer assumes the work, expenses and maintenance costs.

Rent and bouquet

The amount of the transaction is fixed from the price of housing as for a conventional sale, with a deduction if the seller keeps the right to occupy the housing.
Part of the price is usually paid at the time of signing the sale. This payment is called bouquet. It often represents 30% of the value of the property.
The rest of the prize is paid in the form of annuity. Its amount results from complex calculations combining different criteria such as:

  • the value of the property and the amount of the bouquet;
  • the age of the seller: it allows to establish its life expectancy from life table and thus the duration during which you should, according to the statistics, pay the rent;
  • the rate of return of the property: it is fixed according to the rent that could be asked if the housing was rented;
  • for a free life, the fact that you have good.

The price to pay

From this complex calculation, it follows that:

  • the price of a free life annuity is higher than a life annuity;
  • the older the seller, the higher the amount of the annuity;
  • if the annuity bears on two heads, the annuity will be less important. This will be the case if you buy the property from a couple and pay the annuity until the last spouse dies;
  • if the seller is interested in additional income, he can ask for a small bouquet and a big rent.
The annuity sales contract provides, in principle, for an annual indexation of the amount of the annuity to guarantee the purchasing power of the seller.
It is imperative never to engage in such an operation without having taken advice from his notary and professionals specialized in this type of assembly.
To know more:

Life Price Examples

In the Var region:

  • Life annuity: a house of 148 m² worth € 410 400 is offered at the following price: 22 400 € bouquet and 1790 € monthly rent. The seller is 80 years old.
  • Life annuity: an 81-year-old lady sells her 120m² house worth € 435,000 at the following price: € 162,600 and € 990 monthly income.

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