A review of QuantumRE, an “equity sharing” product
There are a number of companies (see reviews of Point.com and Unison) that have popped up over the last few years that offer to “buy” a part of your home equity for a certain amount of money and then share in the change of value with you. These products compete with traditional ways to tap into home equity, like home equity loans and home equity lines of credit (HELOCs). It’s important to really evaluate these “equity sharing” products, as often the description of how they actually work is slim, or at best, confusing. Such is the case with QuantumRE.
From the website, QuantumRE states that it is has two sides of its business, 1) a product for homeowners who want to “release the equity in your home – without additional debt”, and 2) a product for people who want to invest in real estate. For the purpose of this review, as we are a site for homeowners and not investors, we’ll focus on the product for homeowners, not investors (for now).
QuantumRE’s website lacks detail
Compared with Point.com and Unison’s websites, QuantumRE lacks a lot of detail into the mechanics of how their “equity sharing” works. I suspect the company is very young, particularly as several of the employees listed don’t seem to work there full time or are consultants. So, perhaps it is premature to review this company – I was pointed to it from a reader of ours who was looking to compare it to other options. Nevertheless, the website is up, they appear to be doing business, taking leads and information from homeowners, and we’ll update as we need to.
The main feature of the site, once you identify yourself as a homeowner is to put in an address and zip code and it gives you a sense of how much money they might give you. Here’s an example:
Sounds incredible, right? Especially when they say you’ll have “no monthly payments” and “no additional debt”. But, that’s really all the information that’s provided on the site with regards to how much money you might qualify for, how the equity sharing is determined or any fees involved (as of the writing of this article).
More substantive information is available via QuantumRE’s brochure
If you go to download their brochure, you’ll learn that QuantumRE:
- “Will pay you between 10% and 30% of your home’s current value”
- When it comes time to divide up equity, if they pay you 30% of your home’s current value, their share of the increased value of your house over time would be 75%. “So, if your home increased in value from $400,000 to $500,000, our share would equal $75,000. You would be entitled to the other $25,000.”
- If they gave you 120,000 based on a value of $400,000, “the total amount owed to us would be $195,000, which equals the initial amount we paid to you ($120,000) plus our share of the appreciation ($75,000).”
- They put a lien on your property: “in order to memorialize and cement our purchase agreement, we will file a lien on your property with your county government.”
- It is a bit murky what happens if your property declines in value: “If there is depreciation, then our share of the loss is subtracted from the initial purchase amount which is paid to us after you have been paid for the home.” This seems to indicate that you owe less than they originally gave you. but the exact mechanics are unclear.
- Before remodeling, you have to pay to get your home appraised, and also pay to get it appraised after you remodel, and “the value of the property after the remodel cannot be lower than the value prior to the remodel.” Or, what? It doesn’t say.
- Any loans the homeowner takes out in the future must be approved by QuantumRE: “we have a loan approval process that may allow additional loans to be taken out on the property as long as they are approved by us.”
- As with any agreement, what is in the contract seems critical to understanding how QuantumRE actually works: “we do not have any say in the decisions you make about the home, beyond what is stipulated in the initial contract you sign with us when embarking on the equity share release process.”
The approval process laid out in the brochure is:
- Qualification, which “has little or nothing to do with your credit score, or your ability to make payments. Rather, it has more to do with determining the amount of equity in your home at present and forecasting property appreciation or depreciation over time.”
- Approval and valuation where they “send an appraiser who will do more than simply inspect your home. He or she will also investigate real estate trends in your area.”
- Sign the paperwork and place the lien on your property.
Recommendations if you are considering QuantumRE
Get a sample contract upfront
As with any agreement you enter into, it is essential that you fully understand what you are agreeing to. Step 1, before you start working with a company like QuantumRE, or any equity sharing company, you should ask for a sample contract. If they are putting a lien on your property, they will definitely have a standard contract with language describing what you would be agreeing to. What are the restrictions on your ownership when you enter into this agreement? Make sure you read it throughly, and also have a lawyer read it. This way, you won’t waste your time if it’s not something that seems to be in your best interest.
Get all questions regarding the lien and ownership answered upfront
Can you rent the property? Can you sell the property for any price you want? What if you want to get out of the agreement? When can you pay the money back and is there a penalty? There are so many unanswered questions, and you’ll want to fully understand how entering into this agreement will limit your freedom as a homeowner.
Get a clear answer on any associated fees
QuantumRE does not mention fees. Other equity sharing companies state that they have fees. Maybe they have no fees, but I would ask if there are fees relating to appraisal, or on top of the amount they are giving you that are due at any point during your arrangement.
Understand when you can terminate the agreement and how
Can you get out of the agreement early? Is there a penalty? Can you pay them back early? If so, how do they calculate how much you owe at any given time? These are critical questions you’ll want answers to before agreeing to anything.
Do the math, and compare to other options
In the example they provided above and in their brochure, a person who has a home worth $400,000 might be able to “sell” 30% of their home’s value for $120,000 and get a check for that amount. According to the same example, they would owe QuantumRE 75% of the increase in equity upon sale of the property. So, if the home appreciated $100,000, they would owe the original $120,000 back, due upon the sale of the property, plus $75,000 (75% of the $100,000 in appreciation) for a total of $195,000.
If this were you, you would have paid 63% more than the original loan amount! Of course, your property could appreciate less. You’ll want to compare various appreciation scenarios to rates on personal loans, home equity loans and HELOCs. Here’s an article that compares a personal loan for home improvement to a HELOC.
Also, you’ll want to consider if there are renting restrictions or other restrictions, how much potential income you might lose out on, given what’s in the contract, or benefits to you that refinancing might provide, considering QuantumRE has the right to approve or not approve any future loans.
Be clear on what happens if depreciation occurs
There are no concrete examples of what happens if depreciation occurs in any of the information I ran across. It is critical to understand exactly what you’d owe in any depreciation scenario.
As with anything, the devil is in the details. Make sure you get all the details concerning your particular property and situation upfront, and consider all of your other options. Fully understand what the lien is, how it works, and any restrictions on your rights as a homeowner. A lien on your property is not something to enter into lightly.
Also, as with any of these home equity products, their financial stake is bigger if your property is undervalued from the beginning, as then there is more “appreciation” or less “depreciation”. I’m not saying that QuantumRE does this, as there is scant information available, but it is highly recommended that you do your own analysis of your home’s value. If you want to independently assess the equity in your home and how much it is worth, we have tools for you. You can also learn more about real estate trends and statistics, or home appreciation.
And, if I were considering QuantumRE, I’d want to know many customers they have had, as they seem very new.