Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Viager

What it is:

A viager is a French method of real estate sale whereby the buyer makes a down payment and agrees to make a series of payments for the rest of the seller's life.

How it works (Example):

Let's say John Doe wants to buy a $700,000 house in Paris. Jane Smith already lives there. He cannot get a mortgage in France, so he enters into a viager with the seller. Under the deal, John gives Jane $320,000 now and then agrees to make $2,000 monthly payments every month for the rest of her life. Jane uses the money to live on while she still lives in the house.

Jane dies 10 years later. John receives the house and has paid far less than $700,000 for it.

Why it Matters:

From a seller's perspective, a viager is like an annuity because he or she receives a series of monthly payments for a lifetime. From a buyer's perspective, a viager is a way to get a house for less money and more commitment. As the example shows, a viager is also a bet on when someone will die. Accordingly, elderly people can make money from the sale of their homes through viagers, though very old people are likely better off selling the house for the full market value outright, because they are unlikely to live long enough to collect enough payments to make them whole.