The Equity Advantage

What is Equity Advantage?

The Equity Advantage 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 appreciates 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 $200,000 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 reoccupied?

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 new resident pays an entry fee of $225,000. If that resident later dies or moves away from Carolina Meadows, they or their estate would be responsible for a 5 percent remarketing fee (about the same as a real estate commission) and a refurbishing fee of approximately 7 percent. After the refurbished residence is occupied by a new resident paying the current entry fee, the refund goes to the former resident, or their estate, along with half of any net appreciation.