With the fear of declining residential values keeping many would-be homeowners from entering the market, Move Inc. Chairman Joe Hanauer believes he has come up with a solution to get buyers off the fence: insurance policies that offer some protection in the event of home depreciation.
“If you want to restart home sales, you have to deal with the biggest factor impacting sales today, which is the erosion of home values,” explains Hanauer, who is circulating the concept to different administration officials on Capitol Hill. “The avalanche of falling home prices continues to bury consumers in fear, uncertainty and doubt.”
Home-value coverage might be structured to charge buyers a premium of 1 percent to 3 percent of their purchase price, with the insurance kicking in if the property is sold at a loss after three or more years. Such policies are already in play in the private sector, but they are relatively new; and Hanauer declares that these carriers are not equipped to handle the problem, anyway.
“The federal government, simply because of the scope and scale and the kind of muscle that would be needed, would have to do it,” he insists.
The cost to administer the program could be anywhere from $20 million to $150 million, he estimates, based on how much of the insurance would be underwritten by the U.S. government, how much consumers are responsible for, and how much real estate values drop.
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Certain times insurance value gets so high that it gets out of budget for many. Real estate agents must clear the approx payment to the buyers in advance to avoid any trouble in the deal later.
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