Viager Real Estate: Betting on Life and Death
Imagine a real estate deal where your fortune depends on how long someone lives. It’s called “viager,” a centuries-old French practice where buyers and sellers gamble on life expectancy. Now, with the help of AI and advanced modeling, this risky bet is getting a modern twist.
The Story That Made Viager Famous
In 1965, a 90-year-old French woman named Jeanne Calment made an unusual deal with a 47-year-old lawyer. The lawyer agreed to pay her a monthly sum for the rest of her life, and in return, he would get her apartment when she passed away. At the time, it seemed like a smart move—how much longer could a 90-year-old live, right?
Well, Jeanne Calment lived a lot longer than expected, becoming the oldest verified person in history at 122 years old. The lawyer ended up paying more than double the value of the apartment, and he actually passed away before Jeanne did. His widow had to keep making the payments until Jeanne’s death in 1997. This story brought viager into the international spotlight and showed just how unpredictable these deals can be.
What Is the Viager System?
The viager system is essentially a real-life bet on someone’s lifespan. Here’s how it works:
- An elderly property owner agrees to sell their home.
- Instead of getting the full price upfront, they receive a down payment (called a “bouquet”) and then monthly payments for the rest of their life.
- The buyer only gets the property after the seller dies.
It’s a high-stakes gamble. If the seller passes away soon, the buyer gets a great deal. But if the seller lives for many more years, the buyer could end up paying far more than the property’s worth.
Enter AI: How Technology Predicts Viager Outcomes
This is where modern technology comes in. Using AI, we can predict the possible outcomes of viager deals through simulations. Two techniques help make these predictions: Monte Carlo simulations and agent-based modeling.
- Monte Carlo simulations use repeated random sampling to predict different scenarios. In this case, thousands of possible life outcomes for the seller are generated, factoring in things like age, gender, and changes in inflation or property values.
- Agent-based modeling treats each simulated seller as an individual with unique characteristics, offering a more realistic view of what might happen over time.
These techniques help give buyers and sellers a better idea of the risks and potential rewards of viager deals.
I’ve created a script that lets you tweak different parameters. Click here to see if you’ve got a shot at striking it rich—or if you’re more likely to end up on the losing side of the deal.
The Results: A Rollercoaster of Fortunes
Let’s look at an example. Imagine 1,000 men, all 90 years old, living in houses worth €200,000 each. They receive €2,000 a month in viager payments. The AI simulation runs different scenarios to predict how long they’ll live and how much the buyer will end up paying.
First, we see how long these men are likely to live. If someone passes away early, the buyer gets a great deal, spending far less than the house is worth. But for those who live a long time—like Jeanne Calment—the buyer may pay more than double the property’s value..
In this table we see the saldo for each age that the persons died . If it is positive, the buyer gained money, if it is negative, he lost. We see also how much the inhabitants got paid out and how many of them died at a certain age
You can see that 106 people managed to outsmart the system, walking away with more money in payments than the apartment was worth. On the other hand, about 20% of these men pass away within the first year, giving buyers a hefty profit. But most people fall somewhere in between—living just long enough that the buyers pay more than expected, but not enough to lose big. These middle-ground cases balance out the extremes, allowing the real winner to be the company facilitating the deal, which rakes in €10 million.
Understanding the Survival Function Graph
One key tool in analyzing viager deals is the “survival function” graph. This graph shows the probability of the seller being alive at different ages. For the buyer, it’s a visual representation of risk—the longer the line stays high, the more the buyer will have to pay out.
When we plot all the combinations of payments and ages, the graph clearly shows the break-even point—where the total amount the buyer has paid equals the value of the property at the time of the seller’s death.
When we plot the break-even points on a graph, we can visualize exactly when the buyer’s payments match the property’s value, creating a clear picture of the financial tipping points.
The Future of Viager Deals: AI Making Smarter Bets?
As AI and statistical modeling become more advanced, will viager deals become more accurate? Maybe, but the unpredictability of human life will always make these deals exciting—and risky. For now, viager remains a uniquely French way to mix real estate, statistics, and high-stakes gambling.
So, the next time you hear about a viager deal, remember: you’re not just buying a property—you’re placing a bet on how long someone will live. Choose wisely
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