This weekend, Taylor Morrison placed a major bet on the long-term value of its homes and neighborhoods with a new program designed to address buyers’ worries about putting money down on a home when home prices are falling.

The program, called “Total Assurance,” plays into would-be buyers’ worries by promising that if they should sell the home after five years and discover that its value has dropped, Taylor Morrison will refund their down payment up to 10% of the home’s purchase price.

“We see the target market (for the Total Assurance program) as someone who has been looking at the market and is in the market for a new home, but is thinking, ‘Wow, what if…?’” Graham Hughes, Taylor Morrison’s vice president of sales and marketing, told BUILDER Friday. “With this program, they can go ahead and commit” to buying a new home.

The Arizona-based builder launched the program Saturday in selected Florida, Arizona, and Texas markets, with a planned three-month trial period. “If it’s as successful as we think it’s going to be, we’d like the flexibility to keep it going,” said Hughes, who expects the program to generate a 20% increase in incremental sales.

(So far in 2009, Taylor Morrison has sold 3,000 homes, with improvements each quarter, according to Hughes. Cancellations currently stand at 18%, “which is a damn good cancellation rate,” he said.)

Interestingly, Taylor Morrison executives first discussed the concept of such a program about a year ago, but it wasn’t until three months ago, as sales improved in the second quarter of 2009, that they felt the time was right to really develop such an offer. With the economy showing signs of recovery and activity returning to the housing market, though, the Total Assurance idea “became a slam-dunk way to get at the marketplace,” said Hughes.

There are some caveats, of course. But they are smartly designed to address the housing-boom conditions that have proved so challenging to builders and their customers alike in the downturn. Short sales and foreclosures will not qualify for the down payment refund, and Taylor Morrison buyers are must live in their home for five years before selling and applying for the refund.

"The program will also provide a measure of stability for our communities since the Total Assurance guidelines require that you live in the home for five continuous years while maintaining it according to your HOA and home warranty guidelines,” Hughes said. “That's a positive for our new buyers as well as our established residents."

Alison Rice is senior editor, online, at BUILDER magazine.

Learn more about markets featured in this article: Phoenix, AZ.