Buyers’ insurance policy protects homeowners from price drops
Published Wednesday, May 8, 2013 6:00AM PDT Last Updated Wednesday, May 8, 2013 7:22PM PDT
Housing sales in Metro Vancouver have dropped this spring as many buyers hold off on purchasing a home for fear the prices will continue to drop.
But a new tool being offered by some real estate agents may help get the market moving again.
The Buyer Protection Plan was developed by Calgary mortgage broker Greg Williamson as a possible solution offered to buyers to help reduce their risks associated with purchasing a home.
The program allows buyers and sellers to agree on a contract that the buyer will receive a rebate if the market drops one year after the sale of the home. The seller holds back five per cent of the sale proceeds in a trust account with their lawyer and the buyer gets that money back if the price of the home goes down in the 12 months after the purchase.
For example, if you buy a Buyer Protection Plan home for $1.45 million, it would come with a five per cent money back guarantee. If the market falls five per cent in the next 12 months, then the buyer receives $72,500.
The plan uses statistics from local real estate boards to determine whether a property has lost or maintained its value. If the home drops less than five per cent, the buyer and seller share the funds held in trust proportionally.
"They pay a fair price and have an insurance policy just in case the market moves. I think it's an ideal scenario," said creator Greg Williamson.
Veteran real estate agent Terry Eng, who is trying to move homes in a soft spring market, hopes the plan will set him apart from his competitors, and push skittish buyers off the fence.
"It's to alleviate the buyer’s fear that what if prices go down. Well, you know what, you don't have to wait and put your life on hold. You can get going now and buy your home," said Eng.
Buyers pay $299 for the plan, which comes out of the money held in trust after the 12 month period.
The plan was launched in B.C. in January and already more than 100 realtors have signed up. The majority of those realtors signed up are in the Metro Vancouver area. More than 350 realtors across the country are promoting the program, hoping it will give the sagging real estate market a boost.