Equity Advantage
What is Equity Advantage?
The Equity Advantage is a promise made to all new residents of Carolina Meadows when they move into our community. The promise provides that if a resident ever leaves Carolina Meadows, regardless of the reason, Carolina Meadows, Inc. will return the resident’s equity in his or her home; and, if the resale value of the resident’s Carolina Meadows home appreicates to cover the sales costs, the resident is entitled to one half of the net appreciation.
Do all retirement communities offer similar promises?
No, some retirement communities operate on what are known as non-refundable amortized entry fees and others offer refundable entry fees at a fixed percentage rate.
Amortized entry fees melt away at a certain rate per month, often in the range of 2 percent. A resident who pays a $200,000 entry fee would be entitled to a refund of $196,000 after one month, or $192,000 after 2 months and so on. After 50 months, there would be nothing left to refund.
Communities with refundable entry fees typically set refunds at 50 to 90 percent of the initial payment, with no time limit. If the contract called for a 90-percent refund, a resident who paid $200,00 at entry would receive a refund of $180,000. At 50 percent, the refund would amount to $100,000. The resident would not be entitled to any appreciation in value.
Is there a guaranteed profit or guaranteed 100-percent equity repayment when a Carolina Meadows residence is resold?
No. As with real estate on the outside, values are determined by market conditions, and buyers accept a measure of risk. Carolina Meadows has a disclosure statement mandated by North Carolina state law, that will give you additional details on this and other matters.
How would the Equity Advantage work with a hypothetical entry fee of $225,000?
Let’s assume that a $225,000 entry fee purchases a 99-year occupancy right in a Carolina Meadows residence. Later, if the resident dies or moves away from Carolina Meadows, the occupancy right could be transferred at the prevailing market rate. The resident, or the resident’s estate would be responsible for a 5 percent remarketing fee (about the same as a real estate commission) and an estimated 5 percent payment to refurbish the residence. After the refurbished residence was transferred and occupied, the refund would be passed along to the former resident, or their estate, along with half of any net appreciation.
