Partial sale

Partial sale of real estate is a financing model in which an owner sells a percentage of their property-typically up to 50%-to a company and receives immediate cash in return, while retaining the right to continue living in and using the property. In return, they pay a monthly usage fee (also known as “rent” for the sold share) to the new co-owner. We recommend examining this model very critically, as it is often more expensive overall than alternative solutions.

How does a partial sale work?

For example, the owner sells 25% of their property to a partial sale company. They receive the purchase price for this share immediately. In return, they pay a monthly usage fee, which typically amounts to 4-7% of the paid-out amount per year. Upon the subsequent full sale of the property-for example, after the owner’s death or when moving into a nursing home-the company receives its share of the proceeds plus, in many cases, a contractually agreed-upon premium known as a transaction fee, which can amount to 5-15% of the sales proceeds attributable to the company’s share.

The owner’s right of residence is entered in the land registry either as a usufruct or as a limited personal servitude and secures the right to remain even in the event of the partial sale company’s insolvency. However, the right generally expires upon the full sale or under certain contractually defined conditions. The exact terms vary significantly depending on the provider-a detailed comparison of different providers is therefore essential.

Opportunities and Risks of Partial Sale

Opportunities: Immediate liquidity without moving, no monthly loan payments, a guarantee to remain in the home through usufruct or a lifetime right of residence, and the ability to use the released capital for long-term care costs, renovations, or personal goals.

Risks: Over many years, the monthly usage fee can drive total costs far beyond the amount paid out. With a payout of 150,000 euros and a usage fee of 6%, the owner pays 9,000 euros annually-after 15 years, they will have paid 135,000 euros in usage fees, effectively repaying nearly the entire payout amount without their ownership share having changed.

If real estate prices fall, the residual value of the owner’s share may decrease, while the usage fee remains constant or even increases. Many partial sale agreements contain clauses granting the company a unilateral right of sale if the owner fails to meet their obligations-such as by failing to pay the usage fee. In such cases, the owner may be forced to sell, even if the timing is unfavorable.

Independent legal advice before signing the contract is essential. Stiftung Warentest and consumer protection agencies have repeatedly criticized partial sale models and pointed out hidden clauses that can drive actual costs significantly higher than the advertised terms.

Alternatives to Partial Sales

Before owners enter into a partial sale, they should thoroughly examine the following alternatives:

• Real Estate Annuity (Life Annuity): Full sale with a lifetime right of residence and a monthly annuity. The owner transfers full responsibility, receives a lifetime payment in return, and retains the right of residence.
• Reverse mortgage: The home remains in the owner’s possession; the bank makes monthly payments or a lump-sum payment against a mortgage secured in the land registry. At the end of the term, the loan is repaid from the proceeds of the property’s sale.
• Full sale with lease-back: Freedom through a complete sale at market prices, followed by renting your own property from the buyer at an agreed-upon rent. This is often the most cost-effective solution if the rent received is lower than the lost usage fee from a partial sale.
• Traditional Bank Loan: With good credit, a traditional mortgage loan can be more cost-effective than a partial sale-especially if the property is already largely paid off.

We provide comprehensive advice on all models and show you which one best suits your personal and financial situation-without any sales bias toward a specific model.

Practical Tip for Homeowners in Nuremberg and Franconia

In the Nuremberg metropolitan area, many homeowners from the post-war generation have seen significant increases in property value over the past two decades. A single-family home purchased in 2005 for 250,000 euros is now worth 500,000-700,000 euros in many Nuremberg neighborhoods. This capital is tied up in the property and is often difficult for retirees to access.

Before you proceed with a partial sale, have us appraise your property for free-because a full sale with a lease-back arrangement or a traditional reverse mortgage is often significantly more cost-effective than a partial sale model. We know the current market prices in Nuremberg, Erlangen, Fürth, and Schwabach and can transparently calculate which model delivers the most economically favorable result over your individual holding period and life expectancy. In many cases, this calculation shows that a private sale with a lease-back is more profitable than the usage fee of a partial sale, given current Nuremberg rental rates.

Frequently Asked Questions

Is a partial sale a legitimate option?

There are reputable providers on the market, but the basic model is structurally expensive. Stiftung Warentest and consumer protection agencies have repeatedly given critical reviews of partial sale models. The combination of usage fees, implementation fees, and the risk of a forced sale makes the model financially disadvantageous in many cases. We strongly recommend consulting an independent attorney and a tax advisor before signing a contract-the cost of this consultation is minimal compared to the long-term financial consequences.

What happens with the partial sale if I die?

The heirs assume the rights and obligations of the partial sale contract. They may retain their own share (and continue to pay the usage fee), initiate the full sale, or repurchase the sold share at market price-provided the contract includes a corresponding right of first refusal. Heirs should have the partial sale contract reviewed by an attorney immediately upon the opening of the estate, as many contracts contain special deadlines and conditions in the event of death that require prompt action.

How much is the usage fee in a partial sale?

Typically 4-7% per annum of the purchase price paid out. For a payout of 150,000 euros, that amounts to 6,000-10,500 euros per year or 500-875 euros per month - a significant burden that is often underestimated. By way of comparison: A rental apartment of the same size in Nuremberg costs 700-1,400 euros per month (excluding utilities), depending on the location. The usage fee then no longer appears to be an affordable alternative, but quickly approaches the local market rent-without the flexibility of a standard lease.

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