Note: Descriptions are shown in the official language in which they were submitted.
CA 02595742 2007-08-01
A SYSTEM, METHOD AND INSURANCE PRODUCT FOR
INSURING REAL ESTATE TRANSACTIONS
FIELD OF THE INVENTION
The present invention relates to an insurance-type product, methodology and
system, and more
particularly relates to an insurance-type product, methodology and system in
relation to one or
more real estate sales transactions.
BACKGROUND OF THE INVENTION
It is a common practice for individuals to rely on the proceeds from the sale
of one house or real
estate property (hereinafter a "First House") as a major source of funding
toward the purchase of
another house or real estate property (hereinafter a "Second House"), and, to
effect this strategy,
make an offer on the Second House which is conditional on the sale of the
First House. In a
typical real estate transaction, this type of offer may be open for a fixed
period of time, such as,
for example, 90 days, or less, it being understood that a wide variety of
different arrangements
can be devised. In such a case, in the event that the First House is not sold
within the fixed
period of time, the vendor of the First House can either remove the condition
and proceed with
the purchase of the Second House despite not having sold the First House, or
alternatively, not
remove the condition and permit the offer to purchase the Second House expire.
Although a conditional offer may be better than no offer at all, nevertheless,
there are drawbacks
presented by such a conditional offer. For example, as the vendor of the
Second House does not
know, with certainty, that the First House will sell, and there is no
assurance that the vendor of
the First House will have the funds necessary to proceed with the purchase of
the Second House,
in the event that the conditional offer expires (the condition having not been
removed by the
vendor of the First House), the vendor of the Second House cannot proceed with
the sale of the
Second House, and must start the cycle again of seeking out another
opportunity to sell the
Second House.
Furthermore, the purchaser of the Second House does not know with certainty
whether or not the
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i - , Second House can be purchased, or whether or not the condition can be
removed, in the event
that the First House is not sold during the fixed period of time in which the
conditional offer is
open. While the purchaser of the Second House can, of course, remove the
condition at any time,
and possibly, with the aid of bridge financing, proceed with the purchase of
the Second House, if
the purchaser's First House does not sell quickly, the purchaser of the Second
House faces the
risk of potentially owning two properties (which typically would require the
individual to make
two sets of mortgage payments, insurance payments, taxes, maintenance and
other expenses on
both houses), and may have great difficulty or be unable to carry both houses,
putting the
purchaser at risk of having to sell one of the properties at a loss or
otherwise making alternative
arrangements for financing.
It is desirable to have access to protection against the uncertainties of the
marketplace,
particularly as it relates to relatively expensive items such as homes and
real estate and the length
of time that may be necessary to effect the sale of a particular property, and
to be able to reduce,
mitigate or substantially eliminate the risks associated with a single or
multiple real estate
transactions in a convenient, cost effective and simple manner.
SUMMARY OF THE INVENTION
Accordingly, one object of the present invention is to provide a method, and a
system and an
insurance product for reducing, mitigating or substantially eliminating some
of the financial
risks associated with the possibility of not being able to sell a house or
real estate at or near fair
market value within a predefined or determinable period of time.
It is another object of the present invention to provide a method and a system
and insurance
product that identifies the risks, and is adapted to calculate or otherwise
determine the premiums
payable to an insurer in exchange for the insurer assuming some or all of the
risks associated
with paying or providing for the payment of certain costs and/or taxes and/or
expenses relating to
a house or real estate which is for sale and which has not yet been sold.
According to one aspect of the present invention, there is provided a method
of reducing the risk
to a Vendor of a First House that the Vendor of the First House' will have to
pay the Monthly
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Carrying Costs associated with the First House in the event that the First
House is not sold within
an acceptable predefined or determinable period of time, comprising the steps
of, calculating the
Monthly Carrying Costs associated with the First House, establishing a Minimum
Acceptable
Price for the sale of the First House, calculating the likelihood that the
First House will not be
sold at or above the Minimum Acceptable Price during the acceptable predefined
or determinable
period of time and calculating the likely length of time required to sell the
First House at or
above the Minimum Acceptable Price, calculating the potential claim exposure
of having to pay
the Monthly Carrying Costs after the acceptable predefined or determinable
period of time until
the First House is sold at or above the Minimum Acceptable Price, calculating
a premium to be
charged to the Vendor, the Vendor entering into an agreement with a Third
Party, wherein the
Vendor agrees to pay the premium, and the Third Party agrees to pay the
Monthly Carrying Costs
associated with the First House in the event that First House is not sold
within the acceptable
predefined period of time and until such time as the First House is sold at or
above the Minimum
Acceptable Price.
According to another aspect of the present invention, there is provided An
insurance policy
agreement in written form adapted to reducing the risk to a Vendor of a First
House that the
Vendor of the First House will have to pay the Monthly Carrying Costs
associated with the First
House in the event that the First House remains unsold after an acceptable or
predefined or
determinable period of time, the agreement being entered into between the
Vendor of the First
House and a Third Party, the agreement comprising a term wherein the Vendor
agrees to pay to
the Third Party an amount related to the calculated claims exposure to the
Third Party, and a term
wherein the Third Party agrees to pay to the Vendor, on a monthly basis, an
amount equal to the
Monthly Carrying Costs of the First House while it remains unsold after the
acceptable or
predefined or determinable period of time.
According to another aspect of the present invention, there is provided a
system for reducing the
risk to a Vendor of a First House that the Vendor of the First House' will
have to pay the
Monthly Carrying Costs associated with the First House in the event that the
First House is not
sold within an acceptable or predefined or determinable period of time,
comprising the following
elements, data related to the likelihood that the First House will not sell
within the acceptable or
predefined or determinable period of time, a programmed digital processor
adapted to receive the
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t ,
data related to the likelihood that the First House will not sell within the
acceptable or predefined
or determinable period of time, adapted to calculate a number related to the
potential claims
exposure to a Third Party insurer of having to pay the Monthly Carrying Costs
of the First House
while it remains unsold after the acceptable or predefined or determinable
period of time, an
insurance policy agreement being entered into between the Third Party and the
Vendor of a First
House wherein the Vendor pays to the Third Party an amount related to the
calculated claims
exposure to the Third Party, the insurance policy agreement being adapted to
require the monthly
payment by the Third Party to the Vendor of an amount equal to the Monthly
Carrying Costs of
the First House while it remains unsold after the acceptable or predefined or
determinable period
of time.
Advantageously, the present invention provides for the Vendor of a First House
with an
insurance policy type product and a method and system for identifying,
evaluating and thereafter
for reducing, mitigating or substantially eliminating some or all of the
financial risks associated
with the possibility of not being able to sell a house or real estate at or
near fair market value
within a predefined or determinable period of time and provides a method and
system for paying
or providing for the payment of certain expenses relating to a house or real
estate which is
available for sale and which has not yet been sold.
BRIEF DESCRIPTION OF THE DRAWINGS
A preferred embodiment of the present invention is described below with
reference to the
accompanying drawings, in which:
Figure 1 is a table setting out the likelihood that a house in the Halifax,
Nova Scotia
marketplace within a predetermined price range of $200,000.00 to $225,000.00
will sell
during the Elimination Period and thereafter.
Figure 2 is a flow chart demonstrating the methodology of one embodiment of
the present
invention.
DESCRIPTION OF THE PREFERRED EMBODIMENT
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In the preferred embodiment of the present invention, an insurance-type
product and
methodology and system is provided which transfers some or all of the risk
that a First House
will not be sold within a particular or predetermined or determinable length
of time, the risk
being transferred in whole or in part from the Vendor (as that term is more
fully described
herein) of that First House, to a Third Party (as that term is more fully
described herein).
The present invention may be utilized in the context of the below-described
scenarios, with
appropriate and applicable modifications thereto.
Description of the Scenarios to which the present invention may be applicable:
1. Where the vendor of a First House (referred to herein as the "Vendor")
intends to
Purchase a Second House:
(a) The Vendor has a mortgage on the First House and intends to proceed with
the
purchase of a Second House, while at the same time, is desirous of reducing,
or
mitigating or eliminating some or all of the financial risk of having to pay
the
mortgage and other expenses/costs of the First House should the sale of the
First
House not occur until subsequent to the Vendor's closing of the Vendor's
purchase of the Second House (or subsequent to a predetermined or determinable
period of time); or
(b) the Vendor has no mortgage on the First House and intends to proceed with
the
purchase of a Second House, and is desirous of reducing, or mitigating or
eliminating some or all of the financial risk of having to pay the other (non-
mortgage) expenses/costs of the First House should the sale of the First House
not
occur until subsequent to the Vendor's closing of the Vendor's purchase of the
Second House (or subsequent to a predetermined or determinable period of
time);
2. Where the Vendor does not intend to Purchase a Second House:
(a) the Vendor of the First House has a mortgage on the First House and has no
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intention of purchasing a Second House, and is desirous of reducing, or
mitigating
or eliminating some or all of the financial risk of having the First House
remain
on the market for an extended period of time (or subsequent to a predetermined
or
determinable period of time);
(b) the Vendor of the First House has no mortgage on the First House and has
no
intention of purchasing a Second House, and is desirous of reducing, or
mitigating
or eliminating some or all of the financial risk of having the First House
remain
on the market for an extended period of time (or subsequent to a predetermined
or
determinable period of time).
In respect of each of the above-described scenarios, the present invention,
with appropriate and
applicable modifications, provides a system for, a method of, and an insurance
type product for
reducing, mitigating or eliminating some or all of the applicable above-
referenced financial risks
to the Vendor.
With reference generally to Figure 2 which provides a generalized description
of one
embodiment of the methodology of the present invention, where the Vendor of a
First House
wishes to sell the First House and, in the case of a scenario of Type 1 A, 1
B, 2A or 2B, upon the
Vendor determining that it is desirable to reduce, mitigate or eliminate some
or all of the risk of
having the First House remain on the market, in the case of scenarios 1 A and
1 B subsequent to
the closing date of the Vendor's purchase of the Second House (or subsequent
to a predetermined
or determinable period of time), and in the case of scenarios 2A and 2B, an
extended period of
time (or subsequent to a predetermined or determinable period of time), the
Vendor and a third
party (hereinafter the "Third Party") commence taking steps which when
successfully concluded
will result in an agreement being entered into between the Third Party (or a
vendor of insurance
products), and the Vendor as more fully described herein. In one embodiment,
the Third Party is
an insurance company or is authorized to sell insurance products such as the
one described
herein, or an entity acting on behalf of, or a direct agent of an insurance
company, including for
example (unless prohibited by law or regulation), Realtors, brokers, and
others.
In the preferred embodiment, the Vendor has listed, or is required to list,
the First House through
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, , .
a real estate agent, and preferably through one having access to a service
such as the MLS
(Multiple Listing Service) system to give broad exposure to the First House in
the real estate
market, it being understood that while this is desirable, in alternative
embodiments of the present
invention, the Vendor may be selling the First House using various different
techniques,
including selling it personally without the assistance of a real estate agent,
it being understood
that in such a scenario, the agreement with the Third Party would be
appropriately modified to
accommodate this alternative embodiment of the present invention.
In the preferred embodiment of the present invention, the following steps may
be taken:
1. The Vendor Requests a Preliminary Quote from the Third Party:
In this step, the Vendor requests a Preliminary Quote from the Third Party in
which step,
preferably the following information is supplied by the Vendor to the Third
Party,
preferably in electronic form (for example by completing an online/Internet
accessible
form, or alternatively, in electronic form such as in PDF format, HTML format,
or other
electronic format known to a person skilled in the art) or alternatively, in
non-electronic
form which may be readily converted to electronic form:
(a) the Vendor's name,
(b) the address of the First House ,
(c) the postal code of the First House,
(d) the approximate monthly cost of carrying the First House (including for
example,
the taxes, property insurance, utilities, maintenance costs, associated with
the First
House, and in those scenarios where the Vendor has one or more mortgages on
the
First House, the total monthly cost of paying the one or more mortgages, which
costs are hereinafter referred to as the "Monthly Carrying Costs");
(e) the estimated market value of the First House;
(f) the estimated listing price of the First House;
(g) the Vendor's desired coverage level (the amount of money that the Vendor
desires/anticipates to be paid on a monthly basis in the event that the First
House
is not sold prior to an agreed to event or period of time);
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, , .
(h) the Vendor's desired duration of full coverage (the number of months for
which
the Vendor desires full coverage);
(i) in the event that the Vendor is agreeable to have the full coverage
decline after a
specified/agreed to period of time, the Vendor's desired rate of decline from
full
coverage (preferably based on a percentage of decline per month);
(j) the minimum price at which the Vendor is agreeable to selling the First
House
(hereinafter referred to as the "Minimum Acceptable Price");
(k) whether the Vendor wants to be paid only in the event that a certain
specified
event does (or does not) take place (for example, the Vendor only wants to be
paid
in the event that the Vendor has closed on the purchase of Second House in
respect of which the Vendor has made an offer, but still has not sold his
First
House).
2. The Third Party Performs a Preliminary Risk Assessment:
The Third Party performs a Preliminary Risk Assessment in relation to the
information/data provided by the Vendor in the Vendor's Request for a
Preliminary
Quote (Step 1) received from the Vendor:
(a) the Third Party receives the above-referenced information/data (and if not
in
electronic form, preferably, converts it into electronic form) from the Vendor
and
preferably stores the above-reference information/data in a database,
spreadsheet
or other structured and retrievable form on an electronic data storage device
such
as a hard drive, CD-ROM or other electronic data storage device known to a
person skilled in the art, which electronic data storage device is accessible
by a
computer or other programmable or preprogrammed data processing device
(hereinafter referred to as a "programmable data processing device");
(b) the Third Party preferably receives from an Appraiser, a quote on the cost
of or
fee for providing an appraisal of the market value of the First House (and
other
specified information/data), or alternatively, has already received this
information
from the Appraiser (which quote is hereinafter referred to as the "Appraisal
Fee
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Quote")
(c) the Third Party receives (or alternatively, has already received)
information/data
(from, for example, a real estate association such as the Canadian Real Estate
Association CREA or other similar entity or any other entity with access to
the
below-referenced information/data) relating to:
(i) the historical average number of days required to sell a property
comparable to the First House in the same geographic area as the First
House, or alternatively proximate the geographic area of the First House,
(ii) the historical sale price of a property comparable to the First House in
the
same geographic area as the First House, or alternatively proximate the
geographic area of the First House
or alternatively, has already received the above-referenced information, and
preferably stores, or alternatively has already stored, this information/data
in a
database, spreadsheet or other structured and retrieval format on an
electronic data
storage device such as a hard drive, CD-ROM or other electronic data storage
device known to a person skilled in the art;
(d) the Third Party accesses any of its own or industry-collected
information/data
relating to:
(i) the historical average number of days required to sell a property
comparable to the First House in the same geographic area as the First
House, or alternatively proximate the geographic area of the First House,
(ii) the historical sale price of a property comparable to the First House in
the
same geographic area as the First House, or alternatively proximate the
geographic area of the First House.
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(e) utilizing historical information/data from the Third Party's own
experience and/or
historical information/data from CREA or other similar entities or any other
entity
having access to historical information/data relating to the historical
average
number of days required to sell a property comparable to the First House in
the
same geographic area as the First House, or alternatively proximate the
geographic
area of the First House and the historical sale price of a property comparable
to the
First House in the same geographic area as the First House, or alternatively
proximate the geographic area of the First House, the Third Party calculates
the
length the Elimination Period (that is, a period of time, typically, although
not
necessarily, in days, weeks or months immediately following the date of the
listing
of the First House, in which the Vendor will be required to carry all of the
risk of
not being able to sell the First House, a typical Elimination Period for a
particular
market and price range may be that length of time in that particular market
for 85%
of sales of houses in that price range to be affected; for example, in one
embodiment of the present invention, if in a marketplace, 85% of all
properties in a
price range sold within 90 days of being listed, in that example, 90 days
would be
the Elimination Period for that marketplace and price range, it being
understood
that the Elimination Period may vary over time as the market conditions in the
marketplace vary, based on, for example, market demand, market supply, time of
year, local economic conditions and other factors known to a person skilled in
the
art;
Utilizing the above-referenced information/data from Step 1 and the present
step, the
Third Party performs the relevant actuarial calculations based on the supplied
information/data and the relevant historical data available to it, and on a
preliminary basis,
assesses the risk to the Third Party that it will have to pay some or all of
the Monthly
Carrying Costs for the First House (or alternatively, at the level of coverage
requested by
the Vendor if this is less than the Monthly Carrying Costs for the First
House).
3. The Third Party Provides a Preliminary Quote :
Based upon the Preliminary Risk Assessment in Step 2 (and the Third Party's
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expenses/costs, expectation of profit on any agreement subsequently reached
between the
Vendor and the Third Party and such other factors as would be known to a
person skilled
in the art) the Third Party issues a Preliminary Quote and preferably a
Preliminary Quote
Reference Number to the Vendor, which Preliminary Quote provides a preliminary
and
informal/nonbinding calculation of the premium tentatively expected to be paid
by the
Vendor should an agreement be entered into between the Vendor and the Third
Party, and
preferably includes a requirement that, before any further steps are taken in
relation to this
matter, the Vendor pre-pay to the Third Party the Appraisal Fee Quote.
In one embodiment of the present invention, the Third Party provides access to
an Internet
site, or other data entry forms or protocols which allow the Vendor to rapidly
and easily
provide various different scenarios to the Third Party for the purposes of
obtaining a
Preliminary Quote (the Vendor being able to modify, for example, the desired
coverage
level and the duration of full coverage or other factors) to the Third Party,
the Third Party
thereafter providing Preliminary Quotes for each of these different scenarios,
to assist the
Vendor in selecting the preferred scenario for consideration.
4. The Vendor Accepts to Proceed Further and to Request an Appraisal and Final
Quote:
(a) in the preferred embodiment of the present invention, the Vendor accepts
the
Preliminary Quote supplied by the Third Party, and, in the preferred
embodiment,
pre-pays to the Third Party the Appraisal Fee Quote (in a preferred embodiment
of
the present invention, this payment may be made, for example, by way of a
credit
card, which relevant credit card information and authorization to deduct the
amount from the credit card is provided by the Vendor to the Third Party in an
online transaction in a manner known to a person skilled in the art);
(b) in the preferred embodiment, the Vendor provides the Third Party
(preferably in
electronic form (for example by completing an online/Internet accessible form,
or
alternatively, in electronic form such as in PDF format, HTML format, or other
electronic format known to a person skilled in the art) or alternatively, in
non-
electronic form which may be readily converted to electronic form) with
detailed
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, , =
information/data regarding the Monthly Carrying Costs, including for example,
the
outstanding mortgage amount (where applicable), the monthly mortgage payments
(where applicable), the monthly taxes (where applicable), the monthly property
insurance (where applicable), the monthly utilities (where applicable),
monthly
maintenance fees (where applicable) and any other costs associated with
carrying
the First House (it being understood that in an alternative embodiment of the
present invention, this information/data may be provided during Step 1);
(c) in the event that the Vendor is utilizing a real estate agent to assist in
the selling of
the First House, details of the real estate agent's name, address and related
information is provided by the Vendor to the Third Party (it being understood
that
in an alternative embodiment of the present invention, this information/data
may
be provided during Step 1);
5. The Third Party obtains an appraisal in respect of the First House:
(a) an appraisal is made in respect of the First House, and thereafter
information/data
is provided by the appraiser to the Third Party in relation to:
(i) the appraiser's assessment of the market value of the First House,
(ii) preferably, the appraiser's assessment of the length of time required to
sell
the house at the appraised market value of the First House;
(iii) in one embodiment of the present invention, additional information/data
such as the square footage of the house, the age of the house, the condition
of the house, and such other data may be provided by the appraiser to the
Third-Party to assist the Third-Party in assessing the risk to the Third Party
that it will have to pay some or all of the Monthly Carrying Costs for the
First House.
In the event that the Vendor's Minimum Acceptable Price is not less than or
equal to a
predetermined percentage of the appraised market value of the First House, the
Third Party
preferably notifies the Vendor that the Vendor's Minimum Acceptable Price is
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unacceptably high and preferably will require the Vendor to reduce the
Vendor's
Minimum Acceptable Price before issuing a Final Quote. In the event that the
Vendor
does not reduce the Minimum Acceptable Price to an amount less than or equal
to a
predetermined percentage of the appraised market value of the First House, the
Third Party
preferably notifies the Vendor that it is terminating further interaction with
the Vendor in
relation to the Vendor's efforts to obtain a policy agreement with the Third-
Party in
relation to the sale of the First House. In the preferred embodiment of the
present
invention, the predetermined percentage of the appraised market value of the
First House
below which the Vendor's Minimum Acceptable Price must be within an acceptable
range
of the appraised value of the First House, it being understood that the Third
Party has
flexibility in this regard, which flexibility may be used to modify the risk
being assumed
by the Third-Party it being understood that the range may also depend upon
such factors as
the local marketplace for houses, the willingness of prospective purchasers to
purchase
houses in the marketplace at, near or above the listing price, and other
factors known to a
person skilled in the art).
6. The Third Party assesses the risk to the Third Party that it will have to
pay some or all of
the Monthly Carrying Costs for the First House and the premium to be charged
to Vendor:
(i) utilizing the information/data supplied by the Vendor, CREA (or other
entity), the appraiser and its own history information/data, which preferably
has been stored in a database, spreadsheet or other structured and
retrievable form on an electronic data storage device such as a hard drive,
CD ROM or other electronic data storage device, which electronic data
storage device is accessible by a preprogrammed data processing device,
the Third Party (preferably utilizing the preprogrammed data processing
device) performs the relevant actuarial calculations based on the supplied
data and the relevant historical data available to it, and assesses the risk
to
the Third Party that it will have to pay some or all of the Monthly Carrying
Costs for the First House, and based upon this assessment (and the Third
Party's expenses/costs, expectation of profit on any agreement subsequently
reached between the Vendor and the Third Party and such other factors as
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,, .
would be known to a person skilled in the art) issues a Final Quote and
preferably a Final Quote Reference Number to the Vendor, which Final
Quote includes the premium to be paid by the Vendor (and in one
embodiment of the present invention, includes a reduction therefrom
corresponding to the Appraisal Fee Quote if that fee was already paid by
the Vendor during Step 4);
In one embodiment of the present invention, the Final Quote is provided in
written/
paper form (or in one embodiment, in a form or document presented on a
computer
generated screen which preferably includes a method by which, if agreeable to
the
Vendor, may be acknowledged by the Vendor as having been agreed to in a way
that legally binds the Vendor to the terms and conditions in the proposed
Agreement) which Final Quote, in one embodiment of the present invention
includes a proposed Agreement which incorporates the terms and conditions to
be
agreed to between the Vendor and the Third Party and upon which the Final
Quote
is based, which proposed Agreement will include the terms of payment for the
premium, and the conditions for payment to the Vendor under the policy to be
prepared by the Third Party, and other terms and conditions that may be
relevant or
required by law in the relevant jurisdiction.
In one embodiment of the present invention, the following additional
information
is provided to the Vendor, namely:
(a) The "appraised" value of the house (that is, the value attributed to the
First
House by the Appraiser in Step 5);
(b) The "fair market" value of the house (that is, in the preferred embodiment
of the present invention a value within a range of the appraised value of the
First House, which represents the number at or below which the Vendor's
Minimum Acceptable Price must be);
(c) The agreed to "elimination period" and/or the agreed to event which will
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trigger payment under any policy (for example, the Vendor has closed on
the purchase of the Second House but the sale of the First House has not yet
occurred);
(d) the agreed to duration of full coverage (the number of months for which
the
Vendor will have full coverage of the Monthly Carrying Costs);
(e) in the event that the Vendor is agreeable to have the full coverage
decline
after a specified/agreed to period of time, the agreed to rate of decline from
full coverage (preferably based on a percentage of decline per month).
7. The Vendor Accepts the Final Quote from the Third Party and the Third Party
Collects
Additional Information Regarding the First House:
(i) in the event that the Vendor is agreeable to the terms and conditions
proposed by the Third Party in the proposed Agreement and Final Quote,
the Vendor may either sign the proposed Agreement, or if the proposed
Agreement is in an electronic form, provides acknowledgment to the Third
Party that the Vendor is in agreement with the proposed Agreement;
(ii) in the event that the Vendor has retained the services of a real estate
agent,
the Third Party preferably obtains the following information/data from the
real estate agent:
(a) the real estate agent's name and any unique identifier number for
the real estate agent;
(b) the real estate agent's firm and information relating thereto,
including address, telephone number and other such indicia;
(c) the listing date for the First House;
(d) the listing term for the First House;
(e) the listing price for the First House;
(f) if Multiple Listing Service is being utilized, the Multiple Listing
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,
Service number.
8. The Third Party Issues a Policy
(i) a policy (preferably in written form, or alternatively, presented to the
Vendor in
electronic form so that the Vendor may save and access the policy
electronically) is
prepared utilizing the above referenced information/data, and preferably
utilizing a
preprogrammed data processing device which has access to the above referenced
information/data (stored for example in a database, spreadsheet or other
structured
and retrievable form on an electronic data storage device such as a hard
drive, or
other electronic data storage device);
(ii) in the preferred embodiment, the policy includes the following
information, in
addition to the terms and conditions governing the policy:
(a) the name of the policyholder;
(b) the address of the First House;
(c) the postal code of the First House;
(d) the age of the First House (and in one embodiment, the condition of the
First House);
(e) the policy number;
(f) the final quote reference number;
(g) the total premium paid;
(h) the appraisal fee;
(i) the realtor's name;
(j) the real estate agency name;
(k) the listing date;
(1) the term (length of time) for the listing;
(m) the MLS number if the Vendor has utilized the services of MLS;
(n) the appraised market value for the First House;
(o) the list price for the First House;
(p) the fair market price for the First House;
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CA 02595742 2007-08-01
(q) the minimum acceptable price for the First House;
(r) the agreed-to "elimination period" and/or the agreed to event which will
trigger payment under any policy (for example, the Vendor has closed on
the purchase of the Second House but the sale of the First House has not yet
occurred);
(s) the agreed-to duration of full coverage (the number of months for which
the
Vendor will have full coverage of the Monthly Carrying Costs);
(t) in the event that the Vendor agreed to have the full coverage decline
after a
specified/agreed to period of time, the agreed to rate of decline from full
coverage (the decline preferably being 5% per month or some other value
as agreed upon by the Vendor and Third Party, so that in the case of a 5%
decline, for each month during the period of declining coverage, the
amount to be paid by the Third Party to the Vendor is reduced by 5% (or
such other agreed to amount) from the previous month until the amount to
be paid by the Third Party to the Vendor falls below a predetermined
amount, such as, for example, $50.00 or some other agreed-to amount);
(u) the full coverage amount (that is, the maximum full coverage amount to be
paid on a monthly basis by Third Party to the Vendor under any claim
under the policy).
9. Third Party's Post Policy Issuance Monitoring of the Progress in relation
to the First
House
Subsequent to the issuance of the policy, the Third Party may monitor the
sales efforts,
sales activity, pricing changes and other matters in relation to the possible
sale of the First
House, including, obtaining up-to-date information regarding the current
listing price, and
obtaining copies of any bona fide offers to purchase the First House (which
may, for
example, be obtained from the realtor, in the event that a realtor was
retained to sell the
First House).
10. Claims being made by the Vendor in relation to the First House
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CA 02595742 2007-08-01
In the event that the First House is not sold within an agree to period of
time, or prior to an
agreed to event, (or if applicable, should the Vendor close on the sale of the
Vendor's
purchase of the Second House prior to the sale of the First House), the Vendor
may make a
claim against the policy, preferably submitting to the Third Party the policy
number and
applicable proof that an event has occurred which will trigger payment under
the policy
and that the First House has not yet been sold.
The Third Party preferably confirms that:
(a) the First House has not yet been sold;
(b) the First House was continuously, throughout the coverage period, actively
listed through MLS or equivalent (if this was a term or condition of the
policy);
(c) the First House was continuously, throughout the coverage period,
maintained in good condition;
(d) any Elimination Period has expired;
(e) an event has occurred which will trigger payment under the policy;
(f) that the Vendor did not receive any bona fide offers to purchase the First
House at or above the "minimum acceptable" price.
Upon confirmation of the above-referenced, the Third Party pays out the agreed
to
amounts to the Vendor, for so long as and at the rate in the amount agreed to
between the
Third Party and the Vendor.
It is to be noted that in the preferred embodiment of the present invention,
it is desirable that the
Third Party have access to and may place reliance on relevant historical
information/data in
relation to the geographic region, and the various different price ranges and
property
characteristics within that geographic region to improve the accuracy and
reliability of the risk
assessment process. In one embodiment of the present invention, this
information/data may be
made available from another entity, it being understood, that in the preferred
embodiment, the
Third Party collects and makes available to itself such information/data.
Page 18 of 24
CA 02595742 2007-08-01
In one embodiment of the present invention, it is a requirement that the
Vendor maintain an
"Multiple Listing Service" (MLS, or other similar listing service) in relation
to the First House. In
one embodiment of the present invention, where a Multiple Listing Service is
utilized, an
automated computer implemented search routine is provided by the Third Party
to regularly, and
preferably daily, verify that the actual listing price of the First House does
not exceed the agreed-
to listing price in the agreement/policy, and if a determination is made that
the actual listing price
exceeds the agreed-to listing price in the agreement/policy, Vendor (and if
applicable, the realtor)
is/are notified of the discrepancy, and if the actual listing price continues
to exceed the agreed-to
listing price, the policy is canceled (appropriate terms and conditions are
included in the finalized
agreement and policy to permit this to happen automatically, or at the
discretion of the Third
Party).
In the one embodiment of the present invention, the Third Party has collected
and/or has access to
current and up-to-date experience data of the following nature (it being
understood that in the
preferred embodiment, the experience data is continuously being updated),
namely on a market by
market basis, historical data relating to the sale price of comparable
properties in comparable
locations; the actual amount of elapsed time taken to sell comparable
properties in comparable
price ranges and comparable locations at fair market value, and in the absence
of, or supplemental
to, such data, the estimated amount of time that will be required to sell
specific properties at fair
market value in specific subject markets and statistical data or analysis or
information relating to
the variances of such estimate.
In the one embodiment of the present invention, the Third Party's experience
data/information
and/or other data/information available to the Third Party includes
data/information such as that
provided in Figure 1, namely the likelihood that a house in, for example, the
Halifax, Nova Scotia
marketplace, within a predetermined price range of $200,000.00 to $225,000.00
will sell during
the Elimination Period and thereafter, and the relevant data/information
provided about that house
being preferably stored in a database, spreadsheet or other structured and
retrievable form on an
electronic data storage device such as a hard drive, CD-ROM or other
electronic data storage
device known to a person skilled in the art, which electronic data storage
device is accessible by a
computer or other programmable or preprogrammed data processing device , the
Third Party
utilizing such data/information to in the calculation of the risk that the
First House will not be
Page 19 of 24
CA 02595742 2007-08-01
~, ~ =.
sold at or above the previously agreed to minimum acceptable price before the
expiration of any
predetermined Elimination Period, and in the calculation of the risk that the
First House will not
'sell at or above the previously agreed to Minimum Acceptable Price over a
range of
predetermined periods subsequent to the Elimination Period, these steps (or
one of them) being
taken as intermediate steps in the process of calculating the overall claims
exposure to the Third
Party in the event that the Third Party enters into a policy agreement with
the Vendor.
In an alternative embodiment of the present invention, the Third Party
determines the most likely
date of sale of the First House, and for a range of dates before and after
such date, the likelihood
on each of those days within that range that the First House will sell at or
above the previously
agreed to Minimum Acceptable Price on those days. Using the results of this
analysis and such
factors as the Monthly Carrying Costs (and depending upon which optional or
alternative features
were pre-agreed to by the Vendor, such as the duration of full coverage, the
Vendors' agreement
to have the full coverage decline after a specified period, the length of any
Elimination Period, the
Minimum Acceptable Price that the Vendor is willing to accept and such other
factors as are to be
the subject of an agreement between the Vendor and the Third Party), the Third
Party will
calculate (in the preferred embodiment, by way of a suitably programmed
computer or other
suitably programmed data processor) the potential claims exposure in respect
of the sale of the
First House, (and in one embodiment of the present invention, taking into
account other potential
claim exposure of relevant policies of a similar nature in that marketplace),
calculate and quote a
policy premium to be paid by the Vendor (which premium will preferably also
take into account
the Third Party's overhead, cost of sale, profit and such other amounts as
would be understood by
a person skilled in the art). If the Vendor is agreeable to the premium amount
and to such other
terms and conditions as may be agreed to between the Vendor and the Third
Party, a policy
agreement, preferably in writing, may then be entered into between the Vendor
and the Third
Party, to have the Third Party accept all or some portion of the risk of
carrying the agreed to costs
associated with the First House past any agreed to point in time on such terms
and conditions as
are agreeable to the Vendor and Third Party, and any premium due to the Third
Party in
consideration of the policy being granted, is paid by the Vendor.
In the preferred embodiment of the present invention, the Vendor is under no
obligation to sell the
First House for an amount less than the Minimum Acceptable Price.
Page 20 of 24
CA 02595742 2007-08-01
õ = =
õ' .
In one embodiment of the present invention, a Third Party insurance product or
policy is provided
which'is adapted to reducing or eliminating some or all of the risk to the
Vendor that the Vendor
will have to pay some or all of the Monthly Carrying Costs associated with the
First House in the
event that the First House is not sold within an acceptable or agreeable or
predefined or
determinable period of time and such other conditions and terms as are agreed
to between the
Third Party and the Vendor (which conditions and terms may include one or more
conditions and
terms as set out above), by way of an insurance policy between an insuring
Third Party and the
Vendor which will pay the agreed to portion of some or all of the Monthly
Carrying Costs to the
Vendor of the First House upon the failure of the Vendor to sell the First
House within an agreed
to, predefined or determinable period of time and/or such other terms and
conditions (which
conditions and terms may include one or more conditions and terms as set out
above) as are
agreed to between the insuring Third Party and the Vendor.
In another embodiment of the present invention, an insurance product is
provided whereby an
insurance policy is created by the Third Party for the Vendor identifying and
recording the specific
terms and conditions applicable to the policy (which terms and conditions may
include one or
more of the terms and conditions set out above), the policy transferring all
or a portion of
specified risk that the Vendor will have to pay some or all of the Monthly
Carrying Costs after an
acceptable or agreeable or predefined or determinable period of time, from the
Vendor to the
Third Party so as to reduce or mitigate some or all of the risk to the Vendor
that the Vendor will
have to pay some or all of the Monthly Carrying Costs associated with the
First House in the event
that the First House is not sold within an acceptable or agreeable or
predefined or determinable
period of time at or above the Minimum Acceptable Price.
In one embodiment of the present invention, experience data such as the
historical average
number of days required to sell a property comparable to the First House in
the same geographic
area as the First House, or alternatively proximate the geographic area of the
First House and the
historical sale price of a property comparable to the First House in the same
geographic area as the
First House, or alternatively proximate the geographic area of the First House
is provided by the
Third Party to an appropriately programmed computer or other programmed
digital processor
along with data relating to the Minimum Acceptable Price, the acceptable or
agreeable or
predefined or determinable period of time before which, if the First House is
unsold, the Vendor
Page 21 of 24
CA 02595742 2007-08-01
has no right to make a claim under the policy agreement, the listing price and
the Monthly
Carrying Costs for the First House, the appropriately programmed computer or
other programmed
digital processor thereafter performing actuarial calculations utilizing such
data/information and
reporting to the Third Party information relating to the potential claim
exposure to the Third Party
of having to pay the Monthly Carrying Costs of the First House after the
acceptable or agreeable
or predefined or determinable period of time until the First House is sold at
or above the
Minimum Acceptable Price.
The present invention has been described herein with regard to preferred
embodiments. However,
it will be obvious to persons skilled in the art that a number of variations
and modifications can be
made without departing from the scope of the invention as described herein.
Page 22 of 24
