Colorado company offers hedge against falling home prices

A Colorado company offering a hedge against falling home prices aims to enter the Colorado Springs market.

EquityLockSolutions, based in Greenwood Village just south of Denver, has introduced a new product to the real estate market – a hedge against falling real estate prices.

EquityLock was fast-tracked by ReMax International to make it onto the company’s approved supplier list so that ReMax brokerages around the country can begin partnering with EquityLock. A ReMax office in New Jersey was the first to forge the alliance.

But Mark Dameron, chief marketing officer for EquityLock, said he’s working on making local connections.

He’s spoken with Joe Clement, a broker/owner at one of the Colorado Springs ReMax offices. Clement said he’s familiar with the product and plans to meet with EquityLock soon to get more details, but wasn’t ready to discuss whether or not his office would team with EquityLock.

“Most likely, we’ll be targeting a few other brokerages in Colorado Springs as well,” Dameron said. “We want to grow in our own backyard.”

Dameron explained the product. It’s not technically insurance and isn’t regulated by the same bodies that regulate insurance companies. It is a financial contract between EquityLock and the homebuyer. It typically costs about 1.7 percent of the price the homebuyer is insuring, which is the market value at the time of purchase – but can be any amount up to $2 million.

It’s based on the home price index. If the home price index falls 10 percent between when a homebuyer purchases the policy and when the buyer sells the home, the policy will pay out 10 percent of the insured price. That pay out comes even if the homeowner sells for a profit. But it does not pay if the index is the same or has risen, even if the homeowner sells at a loss.

Dameron said the idea was born two years ago when chairman of the Federal Reserve Ben Bernanke said he thought private enterprise could do something to shore up home values.

The product has been two years in development, Dameron said, while banking authorities reviewed it and determined that it was a financially viable and secure method for insuring home values.

“There are qualified buyers out there,” Dameron said. “The financing is there. They’re just afraid that if they buy now, they’ll lose equity. This certainly gives them peace of mind. We’d like to bring that peace of mind to Colorado Springs.”