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HOME BUYER
HOME BUYER FAQs
ADVANTAGES AND DISADVANTAGES
  • How will having an investor change my ownership experience?
    There are advantages and disadvantages to having an investor involved with you in a home purchase. The pros and cons should be carefully weighed and considered before deciding to seek an investor.
POSSIBLE ADVANTAGESPOSSIBLE DISADVANTAGES
  • Smaller loan, larger house, or better neighborhood
  • Less debt to repay and lower payments
  • Less money tied up in a single investment (diversification)
  • Pay down or pay off the mortgage
  • Live closer to work without committing your life savings
  • Avoid jumbo loans
  • Avoid private mortgage insurance (PMI)
  • Rather than committing all your money, you can reserve some to improve the property and its value
  • If the property loses value, you don’t bear the whole loss alone – it is shared by an investor
  • If you default on the loan, property tax or insurance, the investor may cover the costs temporarily in order to protect the investment (note: you will surrender additional equity to the investor in this circumstance)
  • You must share the appreciation of the home with the investor
  • If you default, the investor could buy the house from you at a discount rather than fair market value (FMV)
  • Your employment, income and credit history will be regularly evaluated since they are central to the value of the investment
  • You may be considered in default if you neglect the care of the property
  • You may not be able to modify the property in any way you wish as the investor wants to ensure that the value of the property is being protected
  • You will need investor approval to borrow against the home equity as the investor wants to make sure that you maintain a significant stake in the property
  • Depending on your home’s appreciation, the cost of money may be significantly higher than with traditional mortgage debt and interest
COMPARING PRIMARQ WITH LOANS AND LENDERS
  • Is PRIMARQ like a mortgage lender?
    Working with PRIMARQ is fundamentally different than working with a lender. Lenders provide loans as the solution to needing money. Repayment of the loans is your only option. With PRIMARQ, investors bid on owning a share of your home equity, which means you pay nothing back against the amount your PRIMARQ investor contributed. In contrast, you will be obligated to pay back any amount you borrowed, plus interest, from a mortgage lender.
  • How does working with a PRIMARQ investor complement working with a lender?
    Working with PRIMARQ can complement working with a lender for the purposes of home buyer qualification, lowering your interest rate and avoiding private mortgage insurance (PMI):
    • Home buyer qualification - a PRIMARQ investor could provide additional down payment capital so that the lender’s required down payment threshold will be met and the loan funded.
    • Lower interest rate - a PRIMARQ investor could provide additional down payment capital so that a lender doesn’t have to offer a higher-interest jumbo loan.
    • Avoiding PMI – a PRIMARQ investor could provide additional down payment capital so the lender’s PMI down payment threshold will be met.
COSTS & FEES
  • Is there a fee required to seek an investor on the PRIMARQ Exchange?
    Yes, because PRIMARQ must arrange for an appraisal, photographs, credit reports and other information to “package” the investment opportunity, there will be a fee associated with seeking an investor for you.
  • Do I pay PRIMARQ’s fees or does the investor(s)?
    As the recipient of the funds, the home buyer pays the PRIMARQ transaction fee.
  • What costs will I incur by taking on a PRIMARQ investor?
    There are costs associated with securing a PRIMARQ investor. The most significant will be a 4-5% transaction fee (on the amount of the investment) that will come out of your closing costs at the time of the purchase.
  • How much are the closing costs?
    The costs of obtaining a PRIMARQ Agreement will vary, but include standard residential real estate transaction fees for: appraisal, preliminary title report, title insurance, credit report, natural hazard disclosure, tax service, flood certification, notary, wire, messenger, recording, escrow/closing and PRIMARQ transaction fees.
  • Is mortgage insurance required?
    No. Mortgage insurance is not required for a PRIMARQ Agreement.
  • Will I get back my cost of improvements at the conclusion of the PRIMARQ agreement?
    Yes, before the property’s appreciation is split, capital contributions such as down payment and capital improvements are returned. However, you will be credited for home improvements up to the lesser of the cost or the appraised value of the improvements at the time the investments were made. As a result, overimprovements will not generate additional reimbursable credit for you.
DEFINITION OF TERMS
  • What is “rental reimbursement”?
    Rental reimbursement is a shifting of some of your owner/buyer expenses to the investor. Since you live in and exclusively occupy the entire property but only own part, the IRS requires you as the owner/buyer to rent back the investor’s interest in the property. This has no material impact on your transaction. You still pay the property’s expenses and no more. A small portion of the expenses are paid into an investor account, and then paid out of the investor account to cover property expenses. All of this is provided for in the PRIMARQ Agreement.
  • What is a “preferred return” and why is the investor entitled to one?
    You, as the home buyer, have complete control of the property, which leaves the passive investor, to a great extent, at your mercy. This presents a problem if you should sell the house shortly after making the purchase because the transaction costs associated with selling your home (realtor fees, title fees, etc.) can be significant. If the home is not given time to appreciate in value, your decision to conduct a sale shortly after the purchase date will almost certainly result in a loss to the investor. The investor signed up to bear a market risk over which you and the investor have no control. However, the short-term sale is something under the home buyer’s control and may have been planned by a home buyer before the purchase was made, thus taking advantage of the investor. To address this potential problem, if the home is sold within 12 months of the initial PRIMARQ investment (not a secondary trade) the investor may be entitled to some level of a preferred return.
LIMITATIONS & RIGHTS
  • What are my financial responsibilities as the home buyer?
    The home buyer is responsible for the property taxes, mortgage, insurance and the cost of any maintenance or improvements associated with the occupying the home. You may invite the investor to participate in capital improvements (e.g., add a room, swimming pool, etc.), but their participation by making a further investment is optional and voluntary.
  • Can I transfer my agreement to another home buyer?
    No, but you may sell the property to any other home buyer and thereby conclude the PRIMARQ agreement.
  • Must the home be my primary residence?
    Yes. As a result, you may not purchase a home with a PRIMARQ investor as a rental property or convert your home after purchase to a rental property. PRIMARQ’s investors invest in owner-occupied homes exclusively.
  • Can the investor ask to stay or live in my home at any point?
    No. In all likelihood, you won’t even communicate directly with the investor. Their involvement is completely passive. Any communication with the investor will be handled through a PRIMARQ representative. The investor has no right whatsoever to reside in the property.
  • Will my investor visit my home?
    An investor may never come to the house unannounced and invade your privacy. If there is evidence of failure to maintain the property, the investor may request a visit through a PRIMARQ representative that oversees the relationship. Any such visit will always be preceded by at least a 10-day notice.
  • Can an investor rent out “their” portion of my home?
    The investor does not have the right to claim occupancy of any part of the home. You as the home buyer have complete and exclusive occupancy of the home.
  • Do I need to live differently after securing a co-investor?
    No, you should continue to do those things that you are probably already doing as a responsible home owner, such as:
    • Keep the home as your primary residence
    • Keep the home in good repair
    • Keep your mortgage payments and property taxes current
    • Keep insurance in place
    • Keep PRIMARQ informed if you plan to sell the home or move
PRIVACY & SECURITY
  • Is my information protected? Is the PRIMARQ site secured?
    Information security is a paramount consideration at PRIMARQ. We take the following measures to make sure that all our customer data is secure:
    • Encryption
      PRIMARQ employs some of the strongest methods of encryption commercially available today. All online activity involving personal or sensitive information is encrypted from the point it leaves your computer until it enters our systems.
    • Customer ID & Password
      When you sign up for online access to PRIMARQ, you create your own personal password. Together with your customer ID, your secret password allows you encrypted, secure access to your account.
    • Timed log-off
      The PRIMARQ exchange automatically logs you off after an extended period of inactivity. This reduces the risk that others could access your information from your unattended computer.
    • Firewalls
      To block unauthorized access, all our computer systems are protected by firewalls, electronic barriers that prevent unauthorized access to our networks.
    • Employee access to your information
      Just as we limit physical access to our work areas, we also restrict access to systems containing customer data and monitor system access continuously.
  • Will I know who the investors are?
    Yes. But since their interest is passive, there will be no need for regular communication between you and the investor. Investors will be identified in the closing documents.
  • Will the investors know who I am?
    Yes. When an investor makes a financial commitment, they are doing so based on the soundness of the investment. That soundness is based on the house itself and also on you as the party who will pay the mortgage and maintain the property. Just as a mortgage lender will evaluate you as a credit risk, the investor also needs some assurance that you are safe to invest with. If you are unemployed, have a poor FICO score, have a high debt-to-income ratio, etc. they are far less likely to invest with you than if the conditions were otherwise. As a result, the investor will be provided personal information about you just like the banks and mortgage lenders require. However, information that could compromise you in any way (e.g., social security numbers, bank account numbers, etc.) will be hidden from investors. All personal information will be strictly confidential. Investors may only view your information after signing a non-disclosure agreement.
  • What kind of background checks do you do on me? How much of that will be shared with investors?
    For the most part, the background checks will be the same as those conducted by a mortgage lender (e.g., FICO scores, public background checks, employment, etc.). The information that is typically available to a mortgage lender (who is assessing how risky it would be to lend money to you) will be made available to prospective investors (who are assessing how risky it would be to co-invest with you). Access to your information will only be allowed under a non-disclosure agreement.
RESELLING THE HOME
  • Is there a minimum amount of time that I need to live in the home before I can sell?
    No. However, the investor may be entitled to a “preferred return” of 4 or 5% if you sell the house within 12 months of the PRIMARQ transaction. There will be significant selling costs that will likely not be offset by any significant appreciation in that short duration. Since you have forced the investor into a situation where they will likely have lost money, due exclusively to your decision, the investor is entitled to this provision.
  • Do investors have a say in when, or to whom, I sell my home?
    The investor may not object to a sale based on the buyer’s race, religion, age, sex, etc. However, the investor may voice a concern and oppose a sale to, for example, a family member at a below market price. As long as the investor’s investment is not threatened or being undermined, they will have no say.
  • Does my investor need to agree to the final sale price?
    Yes. In order to protect investors from unscrupulous home owners who could sell the house for well under market value and receive a “kickback,” the investor must approve the final sale price. At the same time, their approval cannot be unreasonably withheld. In order to protect you, the investor must produce appraisals, at their cost, that demonstrate the below-market-price. Furthermore, to protect both you and the investor, the investors have the first right of refusal so that they can purchase the property at the final sale price themselves if they so choose.
  • How is the final sale price divided between my investor(s) and me?
    If a house is sold, any remaining mortgages are paid off, and then you and the investor(s) remove your respective capital contributions (down payment, capital improvements, etc.). The remaining equity is distributed to each party in proportion to the previously agreed split.
  • Does my investor(s) pay my Realtor’s commission, or do I?
    The commission is removed as a selling expense prior to the division of equity. In essence, both you and the investor pay for the commission in proportion to your equity ownership.
TAX & LEGAL
  • Should we have our transaction reviewed by an attorney or tax professional?
    Yes. Tax laws that pertain to equity sharing apply nationwide, but it is still important to review your transaction with your tax professional. Your attorney should also put their stamp of approval on your agreement because laws differ across the country and around the world.
  • Does the IRS allow mixed tax treatment for one property?
    Yes, the mixed tax treatment in the PRIMARQ equity share is permitted by the IRS. Internal revenue code §280a allows the occupier to claim interest in the property as their primary residence while the investor claims it as an investment property.
  • As the home owner, do I receive all of the tax deductions?
    You will receive all of the tax deductions except for the small amount called the “rental reimbursement” described above. When the exchange opens, the PRIMARQ equity share calculator will approximate each party’s tax deductions.
  • What is the tax treatment of the cash you receive under a PRIMARQ Agreement?
    PRIMARQ does not give tax advice and every home buyer is encouraged to speak to their tax advisor for a full explanation of the tax treatment of a PRIMARQ Agreement. It is PRIMARQ’s objective to have these equity sharing transactions be treated within the guidelines of investment property and its respective tax treatment.
TRANSPARENCY & OBJECTIVITY
  • Does PRIMARQ represent the investor or the home buyer?
    Neither. PRIMARQ is an objective, transparent marketplace whereby investors, home buyers and home owners can work together to achieve their individual goals. PRIMARQ does not take sides, but does seek to establish standards that protect the interests of all parties.
WORKING WITH INVESTORS
  • How can I decide if working with a PRIMARQ investor makes sense for me?
    PRIMARQ is an objective and transparent marketplace. We believe it is our obligation to educate you on how the process works and the potential advantages and disadvantages so you can make an informed decision about what is best for your situation. To further your education, we recommend the following actions:
    • Read the available materials on the website to learn more about PRIMARQ, how it works, its advantages and disadvantages for you. And when the exchange opens:
    • Participate in a webinar and ask any questions that you may have;
    • Get a username by joining as a prospective buyer and then participate in the online forums to discuss your questions and concerns, and hear the experiences of others like yourself;
    • Find real estate agents and/or lenders that have been PRIMARQ certified and ask them about how they can help you accomplish your objectives with PRIMARQ.
  • Do I ever speak with or meet with my investor(s)?
    Since the investor is passive, ideally there will be no need for you and the investor to meet. The structure of the relationship and the appropriate rights and actions are designed to minimize the need for communication. However, if you desire a conversation or meeting with the investor, it can likely be arranged.
  • Can I buy out my investor(s)? How?
    Yes, you can buy out an investor in a way similar to that in which a public company buys back its shares. If the investor seeks to sell their interest in your home to another investor on PRIMARQ’s secondary market, you will be notified and have the right of first offer to buy out your investor. You may also buy them out whenever you like, but it will be at a market established price. Though you are the home owner, the investor is not obligated to sell their interest to you at a discount.
  • How long does an investor have a stake in my home?
    Think of the investor as a stockholder in your home. Just like companies sell stock to raise capital to help the company’s operations, you have sold an interest in your house to raise capital to help your purchase in one of several ways:
    • Additional funds to acquire a larger down payment and take out a smaller loan, lower loan rate, avoidance of PMI, etc.
    • Additional funds to buy into a better neighborhood
    Unless the house is sold or the investor bought out, the stake goes on in perpetuity. There is no debt for you to repay so the investor’s interest is uninterrupted until they are bought out. If the investor should sell their interest, the stake is simply purchased by a different PRIMARQ investor. The stake will still remain in perpetuity until you buy out the investor or until the home is sold. Again, recall that the investors can get out by selling their stake in the PRIMARQ market on a secondary basis. For you, you still will have an investor, but now a different one. The original agreement would stay in place.
    At times there may be a “maturity date” on the investment, whereby the occupier should make provisions for monetizing the investor, but by placing a fixed maturity date may categorize this equity investment as debt, and many of the beneficial treatments of PRIMARQ investments may be lost.
  • Can the investor(s) buy me out of my home?
    Yes. There are two possible situations in which this could occur:
    Voluntary buyout - it is unlikely that the investor will want to purchase the house outright because the investor would become a landlord of a rental property, not a passive investor of an owner-occupied home. In the unlikely event that the investor wished to purchase the home for their own primary residence, arrangements could be made between you and the investor as with any private party.
    Compulsory buyout - As long as you maintain the property, pay the mortgage, etc. there will be no threat to your mutual investment and no need and no ability for the investor to take action to buy the property. If, however, your negligence (e.g., you default on the mortgage) threatens the value of the investment, the investor may step in to cover your obligation to keep the house from going into foreclosure or being threatened by legal action. Even then, they do not “buy you out,” but act to protect their (and your) investment from external threats. In the rare case of extreme negligence, such as you abandoning the property and the investor covering your expenses, your equity level will decrease in favor of the investor until your ownership will be nonexistent and the investor will own the property outright. In the event of a default, instead of covering your expenses, the investor may instead exercise an option to buy out your interest at a discounted rate. Note: Even in the event of a default, you will have time to make remedy so that you don’t have to lose your interest in the home.
  • Can the investor ever make me sell my home or take over control of my home?
    Such extreme actions can only be carried out after ongoing negligence on the part of the home owner. A lesser action of increasing the investor’s equity stake in the property will likely first be carried out in the case of a default on the part of the home owner. Examples of default would include:
    • Home owner fails to maintain the home as their primary residence
    • Home owner fails to keep the home in good condition, ordinary wear and tear excepted.
    • Home owner does not promptly pay taxes, insurance and any mortgage loan.
    • Home owner exceeds the agreed upon limit on the total principal amount of any loans that may be secured by the home.
    However, in all such cases you will have the right and opportunity before the investor takes any action, to remedy the situation.
  • What kind of background checks do you do on investors?
    The investor background check will not be as exhaustive as it will be with you because the investor is making a one-time investment. They must declare their accredited investor status and a few more disclosures. Once their money is invested, you and PRIMARQ do not need confidence in their ability to pay an ongoing mortgage. We do not need their credit score, their employment history, among other data. We confirm the investor’s identity to be assured they can fulfill their one-time financial obligation to you.
  • What happens if my home declines in value?
    The investor shares in the value whether it increases or decreases. If your home value declines, the value of the investor’s interest declines as well.
  • How do I improve my chances of securing an investor with the minimum possible equity being shared?
    Put simply, think like an investor. There are two things that will make you attractive to an investor: (1) select a property with a high appreciation potential (for a growth interested investor) or one with excellent stability in volatile times, and (2) make sure you are a solid investment risk with an excellent credit history and a low debtto- income (DTI) ratio.
  • Do investors have a say in which upgrades or improvements I make to my home?
    To some degree, yes, based on the extent and nature of the improvement. Cosmetic changes, such as new paint or carpet, will be at your discretion. The equity sharing agreement will typically include a limitation on what can be done on a discretional basis. For improvements that are more structural, such as adding a bedroom or putting in a pool, there will be discussion with the investor. The nature of the improvement could be beneficial to the value of the home but also could result in over-building the property, which may even depress the value. Additionally, it is important to consider how to finance the improvements, and how that is treated in the equity sharing arrangement. If you are seeking to borrow money against the equity of the home, i.e., adding more mortgage debt to the property, that would impact the relationship between the total debt and equity of the original equity sharing, both parties would need to agree.
    If both parties do agree to the improvement, and let’s say the home owner will be providing the funds himself, i.e., not borrowing, then upon the sale of the home, the home owner will receive his cost basis of the improvement back, along with the respective down payments (from the home owner and investor) before the residual equity is allocated between the parties. If the home owner chooses to borrow for the improvement, and it is agreed to by the investor, there will likely be a reallocation of the equity split corresponding to the level of the improvement loan. Additionally, there may be the opportunity that the investor believes in the value of the improvement and may elect to participate in providing funds for the effort.
  • If I make home improvements that increase the value of my home, does the investor share in that amount at the end of the PRIMARQ Agreement?
    Potentially. If you make an incremental investment for improving the home, you will get credit for the cost basis of the improvements when the home is sold. In the PRIMARQ Agreement, upon the sale of the home, both the investor and you as the co-investing owner will receive your invested funds back (both down payment and improvement funds) before a distribution of the residual equity.
  • What is the ownership ratio between home buyers and investors (i.e. how much do I put in, how much do they put in)?
    The ratio of ownership between you and the investor depends on the pricing within the PRIMARQ market, in other words it is determined by the demand of the investment. While you may set a “reserve price”, i.e., the maximum amount of equity you are willing to give up for raising a specific amount of funds, investors will be bidding on the opportunity which can result in a price change. Specifically, if there is considerable investor demand, the “price,” or the amount of equity the investor receives for his investment, may be reduced. For example, if you wanted to raise $75,000 to supplement your down payment, you may be willing to provide the investor 40% of the home equity for those funds. There may be a series of investors who “bid” that price. But let’s say the property appeals to many investors, subsequent “bids” may be priced at $75,000 for 35% of the equity, which benefits you, as more investor interest translates into less of the equity being sold.
  • Do investors have a say in what the terms of my mortgage loan will be?
    Yes. Since any debt or liens associated with the property affect the value of the investment, the investor will be made aware of the loan terms and may back out of the transaction if the terms are unfavorable.
  • Will the investor be a co-signor on the mortgage?
    No. The investor will not be a party to the loan at all.
  • If I want to take out a line of credit on my home, does my investor have a say in how much I can take out and what my terms are?
    Under the provisions of the PRIMARQ Agreement, you are not allowed to borrow additional funds against the home, which results in additional mortgage debt on the property, without the consent of the investor. If you do desire to access additional equity through borrowing, and it is consented to, it may result in a reallocation of the equity share.
  • Am I required to meet my investor?
    No. Since this is a passive deal, the investor can be a silent participant and PRIMARQ minimizes the need for direct communication between both parties. However, PRIMARQ can make arrangements if you wish to meet or converse with the investor.
  • Do I need to provide my investor with an update on the value of my home?
    With your assistance, PRIMARQ will provide a quarterly update on the property and, because of your important role, on your current job and financial situation. This report will also be provided to you, free of charge. Fees for the report will be borne by the investor.
  • If I cannot make my monthly mortgage payment, what happens to me?
    In a typical scenario, you would be in default and at risk of foreclosure by the bank. With a PRIMARQ investor, since their investment is at risk, they have the option (at their discretion) to make the mortgage payments to protect the house from foreclosure. Investors are under no obligation to make the mortgage payments and are not even named on the loan agreement.
    Because your inability to pay the mortgage is causing the investor to pay more to keep the investment intact, this issue will be corrected by reducing your equity interest in the house while the investor’s interest increases. If you discontinue the mortgage for an extended period, your equity interest may be reduced to zero, such that you are no longer considered a home owner at all. Investors cannot be put in the place of covering your mortgage indefinitely. In the event of a default, instead of covering your expenses, the investor may instead exercise an option to buy out your interest at a discounted rate.
    Note: Even in the event of a default, you will have time to make remedy so that you don’t have to lose your interest in the home.
  • How does this impact my investor?
    Your default threatens your investor’s investment because if the property goes into foreclosure, the overall value of the investment is reduced and the property can be taken over by the lender. If you do default, the investor has the right, if they choose to exercise it, to service the mortgage, insurance or taxes. In so doing, the investor gains a larger stake in the property while your share will diminish.
  • Can I sell additional equity in my home to more investors?
    Conceivably, as your equity grows, you can sell it to more investors. However, there is a limit to how far you can go. Since you are the occupier of the house, investors want you to have enough of an equity interest to continue to have an incentive to keep up the property and improve its valuation. Just as the banks want a low loan-to-value (LTV) ratio to make sure they don’t lose out on their investment, your investors don’t want to be the sole equity holders in the property or you may behave more like a renter than an owner.
WORKING WITH PRIMARQ
  • Do I qualify?
    • You must be seeking to purchase a single-family home as your primary residence
    • You must have at least thirty percent of the down payment that your purchase requires
    • You must have a history of financial responsibility and good credit
    • You must be pre-qualified for the loan amount you are seeking
  • How much down payment assistance can I get?
    There is no limit since it is up to the investor’s discretion. To begin with, PRIMARQ will consider investment opportunities for buyers who provide at least 30% of the down payment.
  • How can I apply?
    Application instructions will be provided when the PRIMARQ exchange opens. For now, you may sign up for the newsletter and alerts so that you will be among the first to be alerted when the exchange is available.
  • Do I work with PRIMARQ to buy a home or do I work with a Realtor?
    You should work with a professional realtor in the home buying process. PRIMARQ’s role is to educate all parties and “packaging” the investment opportunity (you and your desired home) in a standardized way so that investors can evaluate what you are trying to accomplish and consider whether or not they should co-invest with you. PRIMARQ manages the investor market and facilitates the selection of the investor and the equity sharing documentation.
  • Am I restricted to working with a limited number of real estate brokerages in order to work with investors through PRIMARQ?
    As the PRIMARQ exchange opens, we will be working with select real estate brokerage firms that are familiar with our process. Ultimately, we will be establishing a certification program enabling most agents and brokerage firms to participate in the market.
  • Do townhomes, condominiums or cooperatives qualify for a PRIMARQ Agreement?
    At the current time, PRIMARQ is focused on owner occupied single family residences, which may be detached homes, condominiums and townhouses. Cooperatives and mobile homes are not being considered.
  • Do multi-family homes qualify for a PRIMARQ Agreement?
    No, at the current time a home must be an owner-occupied, single-family home to qualify for a PRIMARQ Agreement. We do intend to introduce multi-family, commercial and other property types in the coming months.
  • Are homes held in a trust eligible for a PRIMARQ Agreement?
    Yes, homes held in revocable or similar trusts are typically eligible for a PRIMARQ Agreement assuming the other investment criteria are met.
  • Can I get a PRIMARQ Agreement on my rental property or second home?
    PRIMARQ Agreements are for primary, owner-occupied residences only.