Purchasing a home in the San Francisco Bay Area is not just expensive, it is cost prohibitive. Even with salaries averaging more than 45% higher than the national average, two thirds of the population have no option but to rent. Although cheaper, renting is a wasteful alternative.
But what if there were an option between renting and owning? A new company based in San Francisco, ZeroDown, is now offering a creative new solution -blending the security of home ownership combined with the flexibility of renting.
Traditionally, homeowners accumulate home equity over time as they pay down their mortgage debt. With ZeroDown, residents can start building net worth up without taking on a mortgage, and as their name suggests, put nothing down.
How the program works: ZeroDown buys the home you want in their name. Once you sign up, you’ll go through a qualification process with ZeroDown to determine the most suitable price range based on your finances. Typically, ZeroDown works with home prices up to $1,500,000. Once you’ve pinpointed the home you like, you will go through the bidding process together with ZeroDown. When an offer is accepted, the company will close the home on your behalf and is responsible for paying all closing costs.
You will be leasing the home with an option to purchase, entering into an agreement that clearly lays out all the necessary details, including move-in date, monthly rent payment, and your rights and responsibilities as a ZeroDown resident. Only homes or condos used as a primary residence qualify (TICs/multi-family/rental properties excluded). Property taxes and insurance are paid by ZeroDown.
You pay a fixed amount of rent, which applies/builds towards ownership. Purchase credits, representing a percentage of the value of the home, are earned over time. These credits have a two-year cliff, which means that as long as you live in a ZeroDown home for at least two years and are current on all payments, you can put them to use.
After two years, you can buy the home from ZeroDown using your purchase credits applied towards a down payment and the home’s title is transferred to you, or move and cash out and redeem your credits. At the end of five years, you will need to make a final decision to purchase the home or move out.
You are completely protected from any volatility in home prices by locking in the price at which you can buy your home from ZeroDown. If the home price has runaway appreciation and is now worth a whole lot more than your locked in price, you will still be able to buy the home from ZeroDown at the predetermined purchase price (which would be at a discount to market rate).
For example, if you bought a $1,000,000 home, your pre-determined price at the end of year 5 is $1,300,778. After 5 years, let’s say that this home is worth $1,600,000. You’d still be able to buy this home at $1,300,778 and ZeroDown would credit you $182,000 towards purchasing the home from them.
ZeroDown makes money via splitting buy side commissions with partner agents as well as charging a one-time flat program fee of $10,000. For more information visit www.zerodown.com