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Re-thinking insurance: Turlock company offers warranty on home value

POSTED July 22, 2011 8:48 p.m.

Grant Davis, president of Turlock-based GDI insurance, is offering what he says is a revolutionary and one-of-a-kind insurance package that will cover a home’s loss in value for up to 20 percent.

Davis spent nearly four years on the product and hundreds of thousands of dollars in actuary studies and research. With a bona fide underwriter, Arch Insurance, GDI’s Home Value Warranty will launch Aug. 1.

Home Value Warranty would protect a homeowner for losses up to 20 percent if their home’s value declines after they have owned it for a minimum of five years. If the home’s value is down up to 20 percent and the homeowner sells the house between the five and 10 year mark, the HMV will pick up the difference. The HMV could be extended beyond the 10-year mark with an additional premium.

“It is intended to accomplish two main goals — to provide homebuyers with the security and peace of mind that comes with knowing that their home’s value is protected and not just for fire and floods. Secondly, to provide builders, real estate agents and lenders with a tool to help them sell homes,” said Davis.

For owners to receive the insurance the house must sell for less than what they paid for the home originally and GDI will match the home’s price against the Case-Shiller home price index, which tracks home values in a geographical area or community.

The HVW is sold at 2.5 percent of the selling value of a house. For example, if a house is sold at $200,000, the HMV would cost $5,000 one time in the front of a loan or asking price.

If in five to 10 years the house loses value and the initial buyer sells the home for $180,000 the HVW kicks in and the loss is covered.

“Buyers are still sitting on the fence because they are scared, they don’t know if we’ve reached the bottom yet. This will give builders and lenders a chance to give the buyer a peace of mind,” said Davis.

Real estate laws restrict homebuyers from buying the HVW directly so sellers will include the product in the asking price.

While it sounds like a great deal some real estate agents are skeptical of the need for the HVW. A few Turlock agents said the market has already stabilized and while the idea is sound, its timing is off and it would have been great five years ago — before the recession.

“I think realistically this is good option now for higher end homes, anything over $200,000 or $300,000 (in the Turlock area) and new subdivision homes — there is room to drop. But for lower-priced homes I wouldn’t even try to sell it to them,” said PMZ Real Estate Agent Gustavo Perez. “No one is scared to buy a home right now; it’s more they are just waiting for the price to drop so they get the best deal.”

Davis admitted the HVW is a big risk for GDI.

“I’ve spent a lot of time and money to get this going, but the proof will be in the pudding,” he said.

To contact Jonathan McCorkell, e-mail jmccorkell@turlockjournal.com or call 634-9141 ext. 2015.

 

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