Rex Agreement

I just saw a commercial for a Rex Agreement. On the face of it - it looks like another scam designed to take advantage of people's fear in the current housing market.

What is a Rex Agreement? Its a Real Estate Equity Exchange. The company will exchange future equity in your house for cash today.

It sounds similar to payday advance loans or cash for future annuity payments or interest only loans.

I'm not a financial expert, but I hope people will be very skeptical of this agreement.

Remember, the people are trying to exploit your need for immediate cash. They know you'd rather have the money now rather than 10 years from now (or however long it would be before you sell your house).

This is how I think it works...
you tell them how much money you want,
you agree with them on a percentage of the future equity you will give them.
They give you the money. No interest and no monthly payments.
They wait for you to sell your house. (I wonder if they put a lien on the house to make sure they know when its sold.)
When you're selling your house, you'll pay back the loan amount PLUS they'll take the previously agreed upon percentage of the change in the home's future value.

No wonder this 'agreement' is getting advertised right now - they can make more money now when housing prices are down. They're betting on the value of homes going up before you sell again; which also makes sense because the customers they're targeting might not have enough equity in their home to sell until the prices go back up, which is why they need cash now.

Example:
Suppose you decide to give them 25% of the change in future equity in your house.
For that, they'll give you $35,714
Your house value is 500,000.
In 10 years, your house value is 600,000
The change in your home value is 100,000.
$60,714 goes to the company when you sell your house (35,714 for the original loan repayment and 25,000 for their share of the equity).
You just paid 25,000 so you could borrow 35,714. Wow.

On the company's website (http://www.rexagreement.com/index.php) they have a sample calculator that has the example on it.

Not only that, but there are probably penalties, fees, restrictions, etc.
Crazy.

Here's a link to another blog mentioning Rex Agreements and a similar agreement called EquityKey (targeted to seniors).
http://realestateblog.wordpress.com/2008/03/17/rex-agreement-avoid-this-like-the-plague/