Now here’s an interesting idea … Dallas Maverick’s owner Mark Cuban has a blog, and yes, I read it. I don’t know why – he’s an interesting guy, a little impulsive, always speaks his mind, and I can relate to that. So yesterday he posts an article about why homeowners can’t sell a percentage of their homes on the market, just like you can sell stocks.
It’s inventive … it’s different … and I thought it was pretty cool. There are a lot of banks throughout the country that would need to be involved, as their liens are directly involved here.
Why can’t home owners sell some percentage of equity in their homes on a listed exchange ? Why can’t I "Take My House Public ?"
Why not create a market or exchange where homeowners can sell equity in their homes ?
The rules could be very simple
1. The house is appraised by a company approved by the exchange that lists the houses.
2.
"Shares" are set with a Par Value of 10pct of the appraised value. For
a 100k dollar house, there are 10 shares potentially available. However
at no point in time can more than 40pct of the "shares" in a home be
sold. We dont want the opportunity for "hostile takeovers"
3. The
price of the shares will of course be set by the market. In a hot
market it will be set above par, in a tough market like today, it will
sell below Par.
4. All Proceeds from the sale of shares MUST be used to pay down any debt on the home.
This
is the key element of this approach. By selling equity in a home, the
buyer gets an asset based security that will move up and down with the
market. If this market is big enough, there should be enough liquidity
to move in and out of positions.
The seller receives cash that
can be used to pay down the debt and thereby reduce his/her monthly
payments. The seller loses a part of the upside if the market for the
home improves and prices go up, but thats a small price to pay for not
going into foreclosure.
Beyond creating liquidity options for
individuals in the housing market, which i think is a good thing, I
think this will also reduce the volatility in the market. Despite the
best efforts of the residential Real Estate industry, no one ever
really knows what their house is worth until you try to sell it. This
exchange listing approach will certainly make for better information
available for the market, which in turn will also reduce the
volatility.
It will also increase the options of homeowners
who have paid off their homes to acquire capital for 
personal uses. If
a homeowner has completely paid off his/her home and wants to raise
money for whatever purpose, a vacation, a car, education, whatever,
rather than taking on debt , they could get their home appraised, have
the option of selling equity in my home that I would not be
obligated to pay back. An option that would create a significant flow
of capital back into the hands of consumers.
You can read the full text of the article here, which I think is an important part of the whole puzzle … what do you think? Could something like this stabilize an industry? Is stabilization of the real estate roller coaster actually good or bad for our economy? I tend to think that market fluctuations are actually good … it seems to me – and I know little about economics – that a predictability in the market would actually WEAKEN it. We tend to have a more balanced, conservative and steady real estate market here in the New River Valley – would you consider this kind of a setup intriguing? Thoughts?