MARLTON, N.J. – RE/MAX Connection Realtors today introduces a financial product to the South Jersey/Philadelphia market that allows home sellers and buyers – as well as current owners – to protect the value of their houses against the uncertainty of today’s housing market.
The product, called Home Price Protection and backed by EquityLock Solutions, can – depending on the circumstances – provide a payoff at the time of sale to make up for potential loses in the value of the home.
Christopher J. Brown, CEO of RE/MAX Connection, South Jersey’s leading real estate agency, says the product will have a significant impact on today’s marketplace.
“There are many qualified home buyers not purchasing homes today because they are afraid of losing the equity they put down to purchase the home,” Brown said, “Now, they have a product available to them that provides assurances against such drops in the market area.”
When a homeowner, buyer or seller purchases a Home Price Protection contract – currently available only through an agent at one of the RE/MAX Connection offices in Marlton, Mantua and Turnersville – the terms are based on two factors:
1. How much of their home’s value they plan to protect
2. The current value of the region’s House Price Index as set monthly by the Federal Housing Finance Agency (and available at www.FHFA.gov)
The national average cost of the contract is 1.7 percent of the value they plan to protect. Most customers use the home’s current market price at the time they purchase their EquityLock contract, but any value up to $2 million can be protected. At that point, the 15-year contract begins, and it cannot be cashed in for the first two years of the term.
If, in years three to 15 of the contract, the house is sold, the House Price Index at the time of the sale is compared to the Index level when the contract was originally purchased. If the index is the same or has risen, no payment is made; if the index has fallen, then the home seller or buyer will receive a check in the amount of the value of the contract multiplied by the percentage change in the House Price Index.
In addition to homebuyers, Brown said home sellers can take advantage of this product. When the contract is skillfully negotiated by an experienced real estate agent, sellers can offer Home Price Protection as an incentive to buyers to purchase the home.
“We are pleased to partner with RE/MAX Connection. Agents, homebuyers, sellers and owners have all responded to Home Price Protection with enthusiasm,” EquityLock Solutions Co-founder and CEO TJ Agresti said. “The peace of mind, knowing that a property is protected against local market fluctuations, is invaluable and is winning wide acceptance for Home Price Protection.”
Home Price Protection is not an insurance or security product; it is a financial contract between the purchaser and EquityLock Solutions. Here are a few examples of how a contract purchased through EquityLock Solutions would work:
In July 2011, Mr. Jones purchases a home for $300,000 and a Home Price Protection contract to protect that same value. The local House Price Index at the time is 100. In July 2014, Mr. Jones sells the home under one of the following scenarios:
Scenario A
Mr. Jones sells the home for $325,000 and the local index in his area is 105. Since the index increased, there is no claim to file, and the Home Price Protection contract terminates.
Scenario B
Mr. Jones sells the home for $275,000 and the local index has fallen to 90. EquityLock pays Mr. Jones $30,000 at the time of sale. Why? The local index fell 10 percent; therefore, a payment of 10 percent of the contract price is paid ($300,000.00 X .10 = $30,000.00).
Scenario C
Mr. Jones sells the home for $325,000 and the local index has fallen to 90. Mr. Jones receives a payment of $30,000, even though he did not lose money on the home. The sale price of the home does not matter; it all depends on the current level of the federal Home Price Index.
No comments:
Post a Comment