In the 9th century, France enacted into law a way to buy and sell property through something known as une vente en viager. My understanding is that there are other European countries that also allow this, but that it's most popular in France, even if it still forms a relatively small portion of the market.

Here's how it typically works. You're an older person (or older couple) and you want to use your home to generate some cash, but you also want to stay living in your home until the very end. So you offer it up for sale en viager occupé. (This is the most popular option, but there's also le viager libre, where the seller moves out immediately.)

Whoever buys it will usually pay you, the seller, in two ways. They will pay you an upfront lump sum (called le bouquet) and a recurring payment (called la rente viagère) up until the day you die (or both of you die). Once this happens, the buyer then gets full enjoyment of the property. The transaction is complete.

So why would either party want to sell and buy in this way?

Well, if you're the seller, the obvious benefits are that (1) you get to continue living in your home and (2) you get some money now and for the rest of your life. This can be useful if you, say, run out of cash during retirement. It's a means to financial independence.

For buyers, it's the opportunity to maybe acquire a property below its current market price. Because if you don't have access to the home until some undetermined date in the future, well then a discount will obviously need to be applied. The initial lump sum payment is often around 30% of the current value. The other attractive feature is that it's a form of financing for buyers who may not have all the money they need today.

In the end, this is a bet on life expectancy. Because if the seller ends up living for a really long time, then they get the benefit of more annuity payments. However, if they end up living fewer years than expected, then the buyer benefits from having to pay less in annuity payments. They got to buy below market.

It's a fascinating pricing and time-value-of-money exercise, but it's also a potentially morbid way to buy real estate. On the one hand, you could be helping someone live a dignified retirement. On the other hand, you stand to benefit if they die sooner than expected.

Cover photo by Zach Dyson on Unsplash

Last month Zillow.com launched a new feature called “Instant Offers.” Press real estate can be found here.

It is:

“…a way for homeowners to sell their homes quickly by providing them with offers from investors and a comparative market analysis (CMA) from a local real estate agent, as an estimate for what the home might fetch on the open market.

Here is a bit more about how it works:

“To participate in Zillow Instant Offers, verified homeowners interested in receiving investor offers confirm information about the home (number of bedrooms, square footage, etc.), highlight any updates and provide several photos of the home. From there, select investors who buy homes in the area can present their offers alongside the CMA from a local real estate agent. Any investor offers and the CMA will include an overview of fees associated with each option, to enable sellers to make an informed apples-to-apples comparison.”

When I first saw the headline, I thought they were copying Opendoor. But it’s not the same model. They aren’t buying the homes, like Opendoor, they are simply working to coordinate an “instant” transaction. Still, I’m sure that Opendoor provided at least some of the impetus for this feature.

Of course, the most interesting question with these online real estate platforms is: Will they disrupt real estate agents? Mike Delprete wrote a great post about this in the wake of Zillow’s announcement.

But ultimately he concludes something that I have felt strongly for years:

“So, while real estate sites are best positioned to disrupt the real estate industry by displacing agents, they’re also the least likely to do so, because agents are their biggest customers and source of revenue.”

The irony.

About 70% of Zillow’s revenue comes from real estate agents. So it seems unlikely that they – at least currently – will be the ones that turn the tables on agents. 

Some real estate platforms have started diversifying their revenue streams for probably this exact reason. But who knows, it may be a new entrant, rather than an incumbent, who pulls this off.