Despite predictions that home prices are close to bottom, the leading provider of home equity protection sees its customer base exploding in 2012 because of changing consumer attitudes towards homeownership.
In an interview yesterday with Real Estate Economy Watch, EquityLock Solutions’ President Ted Rusinoff said that by year’s end he hopes to reach 10,000 customers under contract for the innovative product, which is not an insurance policy but a contract. After launching in April 2011,
Rusinoff said the greatest problem limiting demand is loss of confidence in housing, especially with first-time buyers. “We’re back to 2000 prices today. We’ve lost 12 years of equity growth.”
He said attitudes have changed greatly since 2006. “Just as the Great Depression changed the way people thought about the economy, the downturn in housing has changed the way people think about volatility in housing. Who’s to say we won’t see price declines again?” he said.
As a result, EquityLock Solutions (www.equitylocksolutions.com) has been marketing its product in non-traditional ways. It has partnered with leading brokerages and franchisers and like RE/MAX, Keller Williams, Real Living and Coldwell Banker to provider their buyers with a degree of equity protection in this market. EquityLock has also teamed up with builders like Pardee Homes and even banks, who want to protect themselves from lost value on their REO inventories.
However, sellers as well as buyers who promise take out EquityLock contracts for potential buyers are finding home price protection to be a draw. “I’ve heard stories of how homeowners who offer home price protection were able to generate traffic almost immediately and sell their home,” he said.
EquityLock’s Home Price Protection provides financial protection to homeowners in the event their local market index value as determined by a decline in the FHFA Home Price Index at the time they sell their home, regardless of the price the home is sold for. It is not insurance but a financial agreement to pay the homeowner upon resale should their House Price Index drops.
“When the stock market falls, you can redesign your 401K to reduce your risk. You can’t do that with a home. We’ve learned that real estate markets change and home values don’t always appreciate,” Rusinoff said.
“The day is coming that home price protection will be a part of every closing. Not so long ago, lenders discovered that title insurance would protect their interests and it became standard. Home price protection also protects the interests of buyers and lenders from a different risk, the risk of equity loss,” he said.