Insurance for Falling Home Prices?

Would you pay an additional 1.5% percent to insure that your new Manhattan home purchase does not drop in price? You may soon be able to find out.

Working Equity, www.equityprotection.com , a San franciso-based firm, is selling homebuyer insurance for declining real estate prices.

The company takes a snapshot of the average home price in a customer’s ZIP code, as tracked by First American CoreLogic of Santa Ana, Calif., a consulting firm that compiles a local housing index.

For example, say you buy a $500,000 co-op apartment in Midtown Manhattan. If, after two years, the average property value in that homeowner’s ZIP code, as measured by the index, has declined by 10 percent, and the homeowner sells the property for 10 percent less than its value at the start of the Equity Protection contract, Working Equity would reimburse that amount, or $50,000, to the homeowner.

Taking into account the 1.5 percent, or $7,500, fee at the start of the contract, the homeowner keeps $42,500 of a possible $50,000 loss.

As an added attraction, even if the homeowners sell the property for 5 percent less than what it was worth at the start of the contract, Working Equity will still pay them the 10 percent, because that was the average loss in value in the homeowners’ ZIP code.

The big stipulation is that you are not allowed to sell your new home for at least two years to be eligible to collect.