Home Value Policy Promises to Shelter Equity in a Meltdown

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With millions of Americans still reeling from the real estate bust's massive blow to household wealth, a little-known form of insurance has emerged as a way for homeowners to hedge their bets against another real estate downturn.

Home value insurance enables homeowners to preserve home equity should real estate prices stumble. For the last nine months, a business called Home Value Insurance Company has been offering the policy, betting that the specter of the meltdown could spur some homeowners to pay for a safeguard on what is often their largest investment.

"I think it is probably a function of an unprecedented drop in home prices and, I think, a logical result that such a business would pop up," said Daren Blomquist, vice president of foreclosure marketplace RealtyTrac. "We've really never seen that before in the history of the housing market"

The policy works like this: Normally, if a homeowner bought a home for $100,000 and sold it for $90,000 in a depressed market, he would eat a $10,000 loss. But if he's got "Home Value Protection," he doesn't shed a nickel: The business reimburses him for the $10,000 after he sells.

In the wake of the housing collapse, many Americans may appreciate the protection offered by such a policy. A recent Federal Reserve report found that household wealth fell nearly 40 percent from 2007 to 2010 and that most of the decline was due to home value depreciation.

So, where was this lifeline during the housing boom? Since most homebuyers were drinking the home-prices-never-fall Kool-Aid, no one would have bought it, said Teri Felix, vice president of Home Value Insurance Company.

"There wasn't really market demand," she said.

But assuming that that's changed, her company started offering its product nine months ago. Since then, customers in Georgia, Arizona, Indiana, Ohio and Oklahoma have "paid $200 to $300 and have gotten $5,000 of protection," she said.

The cost of insurance on a $100,000 home will run you something close to $20 a month, according to the company's website.

While home prices may have diminished $5,000 for the company's customer base in the last nine months, market bellwethers have recently been pointing to a recovery. So some see home value insurance as potentially exploitive.

"You're tapping into the fear and uncertainty that people have about home prices, given what people have been through," Blomquist said. "But you're in a situation where it seems relatively safe where home prices are not going to take, at least, a dramatic drop in the coming couple of years."

Jed Kolko, chief economist of listing service Trulia, agreed that the housing market could be on the upswing. But, he pointed out, "most people's houses won't burn down in the next year, but fire insurance still makes sense for most people, because even though it's a low probability, the cost could be catastrophic."

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Charming Homes You Can Score for $150,000
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Home Value Policy Promises to Shelter Equity in a Meltdown

If you're a buyer, this is the real estate market of your dreams. With home prices severely deflated, you can score an unbelievable deal -- such as these charming abodes available for a mouth-watering $150,000. In a healthy real estate market, they'd be well over twice that. Click through to see what type of pads can be had for such a low price.

Location: Atlanta
Beds/baths: 3/2
Sq. ft.: 1,467

This adorable home was completely renovated and expanded in 2006, with the addition of a master suite, a screened porch, skylights and a new deck. You're getting a huge package for a low price!

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The home has gleaming hardwood floors throughout, and what used to be a side porch is now the perfect office.

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Lounge on the home's screened porch, and enjoy a peaceful summer day (or night) free of bugs!

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Location: Minneapolis
Beds/baths: 3/1
Sq. ft.: 1,250

You're getting big bang for your buck with this home! It has a remodeled bathroom and master suite (with skylights), a modern kitchen and a deck with a fire pit!

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Lush wood envelops the living and dining areas.

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You'll get a spacious backyard perfect for families with young kids, who need room to play! For the adults, pour a cocktail and lounge under an umbrella on the home's new deck.

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Location: Phoenix
Beds/baths: 3/2
Sq. ft.: 1,656

It's getting warmer outside, so drink in this mouth-watering home in Arizona's capital. You'll get mountain views from this house, the perfect summertime oasis.

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The open layout will give you a ton of room, and the floorplan is ideal, with a kitchen off the large living room.

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The large master bedroom with tall ceilings has its own master bath, which has a separate shower, a tub and dual sinks.

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Location: Creve Coeur, Mo.
Beds/baths: 3/3
Sq. ft.: 1,626

An unbelievable price for a daring and stunning piece of architecture! Besides your wicked cool roof, the neighbors will be whispering about how little you paid for the home!

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Check out the super-modern layout, with tall ceilings for an airy feeling. (Not bad for Missouri!)

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The master bedroom is palatial, with sprawling space and its own bathroom.

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Location: Las Vegas
Beds/baths: 3/3
Sq. ft.: 2,145

With over 2,000 square feet on a corner lot in a gated community, it shouldn’t come as much of a surprise that given the state of the Nevada market this supremely cheap home is a foreclosure, and is being sold “as is.”

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The home was built in 2007 and appears to be in pretty good shape. But as the listing agent stresses, it's completely up to the buyer to make sure the house is in a suitable condition.

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Location: Reno, Nev.
Beds/baths: 3/3
Sq. ft.: 1,592

A home with mountain views, this is quite the stunner for $150,000. This home features an open floor plan with a ceiling fan in each of its three bedrooms. The home was painted only two years ago and was landscaped even more recently.

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The comfortable living room is wired for surround sound and has a fireplace.

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The open kitchen space has granite counters, a large center island, a pantry and a separate eat-in area.

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Location: Denver
Beds/baths: 1/1
Sq. ft.: 698

A cheap price in a great location! A cute condo in this building is walking distance to downtown Denver's high-class shopping and dining.

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The condo unit has a patio overlooking Denver's capitol building and features wood floors throughout.

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The charming condo also features a gas fireplace and a washer/dryer!

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Location: Honolulu
Beds/baths: 1/1
Sq. ft.: 513

The location is what makes the $150,000 price tag on this Honolulu condo. It's a short walk to beaches, shopping and restaurants. Who cares if it's on the small side -- you're in the middle of everything!

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The condo is newly renovated and includes a custom kitchen with stainless steel appliances, a travertine bathroom and wood laminate flooring throughout.

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The building also features a spacious tiled lanai with views of the nearby harbor and a private pool. Get a real slice of Hawaiian living without taking a big slice out of your wallet.

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