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I have been investigating purchasing a new place in XXXX XXXX ( having moved here in the last year ). A friend suggested working with Landed.com. They say they want to help essential workers such as teachers, medical professionals, and first responders to buy houses in higher end neighborhoods. When I started talking with them red flags started going up for me. The regular mortgage seems straightforward but the down payment assistance seems to be the idea that is TERRIBLE for the home owner. They said they will provide up to 10 % of the down payment up to {$80000.00}. Once you purchase your new house there are no payments needed until you refinance or sell ( red flag # 1 ). When you do refinance or sell you owe them the original loan amount PLUS 25 % of any increase ( or decrease - red flag # 2 & # 3 ) in value of the property. Red flag # 2 on this one was the decrease idea. They have to approve of the area in which you buy therefore they can make sure that you buy in an area where property values are almost guaranteed to go up quickly. Red flag # XXXX was the percentage. I have already purchased a property in XXXX and seen the results of simply living my condo and making sure the property is maintained. I purchased it at {$150000.00}. 20 years later I'm looking to sell it at somewhere around {$440000.00}. If I had used them to provide 10 % of a down payment at that time they would have provided {$15000.00}. The increase in value would have been about {$300000.00} and 25 % of {$300000.00}. So I would have had to pay them {$75000.00} on a {$15000.00} loan.
When I queried Landed.com about how this is a good deal they responded by emphasizing what the home owner keeps rather than how much money they walk away with. Here is a excerpt from an email they sent me : " For example, if a homebuyer bought an {$800000.00} home, and Landed contributed {$80000.00}, the home 's value at the time of ending the partnership would need to be {>= $1,000,000}. In that case, the homebuyer would buy out the investment by paying the XXXX fund {$400000.00} ( the original {$80000.00} + 25 % of the {>= $1,000,000} change in value ), but the homebuyer would keep their original {$80000.00} + the other 75 % of the {>= $1,000,000} change in value, so in this case, the homebuyer would walk away with {>= $1,000,000}, plus the equity built up by paying down the mortgage over time. '' This struck me as that classic grocery store receipt that says " You saved {$5.00}. '' When the reality is you spent {$55.00}.
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