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Home Builders Offering Job Loss Payment Protection Plans
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Brookside Homes is offering job loss payment protection for qualified buyers of homes in its Ashton Place neighborhood near Wilmington, N.C. | Job loss payment protection plans that insure consumer purchases on everything from cars to furniture — and now homes — are one of the hottest trends to get people buying during the recession.
Within the housing industry, the programs provide a safety net that many home buyers need in order to feel confident about making such a major purchase.
High production builders such as Lennar, Pulte Homes, Ryland Homes and Toll Brothers have initiated job loss protection plans. Many have partnered with the Rainy Day Foundation, a nonprofit established to create and maintain responsible homeownership, to provide that coverage.
Small builders and real estate agencies are also beginning to offer similar programs.
Small Builder’s Program Creates Community Buzz, Traffic and Sales
Brookside Homes, based in Wilmington, N.C., launched its own builder-funded “Homebuyer Protection Plan” in April.
“No doubt the program restores confidence in the buyers,” says Page Robertson, owner/manager of Brookside Homes. “We assume some of the risk our buyers would otherwise be burdened with. It frees them up to have an easier decision-making process, restores their faith that the American dream is still attainable and exemplifies our own faith in the economy.”
Home buyers eligible for the Brookside Homes program must have had 12 months of continuous employment at closing, must live in the home for at least 60 days before receiving funds from the program and cannot have had previous knowledge of any pending job loss.
If unexpected job loss does occur for Brookside home buyers who meet those criteria, the builder will pay up to $1,000 per month for six months.
The program is also weighted to assist two-earner households. “For example, in the event of a married couple where the wife may bring in 60% percent of the income, if she loses her job, the benefit to both home owners would be $600 per month for six months,” Robertson said.
The protection plan is available to the first 25 sales that meet the program’s criteria.
The idea for the program arose from several discussions involving the Brookside Homes sales team and the company’s development partners.
“We are very lucky to be able to sell homes under $200,000, offer 100% financing through the USDA rural home loans program and attract buyers who can take advantage of the federal first-time home buyer tax credit,” said Robertson. “But even with all of these things going for us, we were not selling more homes. Through our discussions, we were able to identify job security concerns among potential buyers and form the program.”
When creating the program, Brookside Homes determined that the chance to increase traffic and sales outweighed any financial risks that could occur. “We based our scenarios on 30% unemployment, and even in those worse-case scenarios, the offer made sense in terms of momentum in the neighborhood and the subsequent payoff on development company debt,” said Robertson.
Because the home buyer protection plan is not a mortgage insurance program, Brookside Homes has funded the program by escrowing funds for any necessary payments in its development company.
Robertson attributes six sales as well as increased traffic and Realtor® participation to the buzz created by the builder’s “Homebuyer Protection Program.”
“We are small and we can react quickly to what the market is telling us,” said Robertson. “We talked about such buyer protection on a Thursday, created a logo, changed our advertising message, hired a public relations firm and rolled out the program to the public in less than a week.”
Real Estate Agency Offers Tools to Build Home Buyer Confidence
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Long & Foster is offering job loss protection for qualfied buyers of new and resale homes that agents sells in the mid-Atlantic. |
Long & Foster, the largest privately held residential real estate company in the country, has partnered with the Rainy Day Foundation to offer its own job loss protection program to help its real estate agents and agencies sell in today’s market.
The Chantilly, Va.-based company has launched its “Buy Confident” campaign that incorporates the Rainy Day Foundation’s HELP service — home owner education and loan protection — created to keep home owners from becoming delinquent, make home owners current if they are delinquent and to create long-term financial stability. The program is offered by its agencies throughout the mid-Atlantic.
“This is the first time the HELP program has been available through the real estate broker channel,” said Scott Shaheen, of Long & Foster in Richmond, Va.
The job loss protection program is available for any current or new listings — both resale and new properties — and is funded out of the seller’s proceeds at settlement. Buyers who are employed full time, are a U.S. resident and between 18 and 66 at the time of closing are eligible.
Underwritten by Virginia Surety Company, qualified buyers can receive up to $1,800 a month for six months in the event of a job loss within the first 24 months of the loan.
The agency’s “Buy Confident” plan also offers tools and resources — such as personalized assessments, a home mortgage rate guarantee (in conjunction with Prosperity Mortgage, an affiliate of Wells Fargo Home Mortgage) — along with the Rainy Day Foundation’s job loss protection. Rainy Day’s HELP program also offers buyers six months of counseling by phone and through newsletters, if needed.
“Everyone is touting that it’s a great time to buy,” said Shaheen. “We want to make sure that potential buyers fully assess their situation and select a knowledgeable real estate agent to help them make responsible choices.”
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