Amy Hoak of RealEstateJournal.com shares Effective Incentives to Woo Buyers and Sell Your Home. Hoak points out that gimmicky incentives like trips, cars, and flat screen TVs are less likely to provide the incentive a buyer needs than good old fashioned price cuts or financial incentives such as:
Reducing the Price (obvious right?)
A price reduction is often the incentive that is looked at first, says Delores Conway, director of the Casden Forecast at the University of Southern California’s Lusk Center for Real Estate.
"The price is something that is a common currency — it appeals to everybody," she says.
Gene Rivers, who owns four Keller Williams real-estate offices in Florida, agrees. If a buyer has in her mind that she’ll pay $350,000 for a home and the seller won’t budge from $375,000, "$5,000 in closing costs and a plasma TV ain’t going to get it done," he says.
Paying Points (one of my favorites!!!)
Sellers can offer to pay mortgage points for a buyer, an incentive that Mr. Dalzell tends to use in environments like today’s, when rising interest rates are at the front of a buyer’s mind. One point is 1% of the loan amount, charged as prepaid interest.
"When a buyer sees a lower interest rate or monthly payment, that’s something they can relate to," he says. The setup makes sense for a buyer who has to buy furnishings for the new place; it also can make for an easier monthly payment transition for families that are upsizing.
Buyers should understand, however, that the lower rate often lasts only from one to three years. Before accepting, understand and plan for the point in time when the mortgage bill will increase.
Down-Payment Aid (not possible in a Co-op)
For some buyers, the hardest part of entering the ranks of homeownership is the down payment — also an area where a seller can help. It’s mostly first-time home buyers interested in this kind of assistance because they’re often the ones lacking in funds to complete a deal, Mr. Zadel says.
"It gets people into homeownership," he says. "The disadvantage is that the buyer is financing that additional amount," he adds, because a seller would likely come down in the price of the home if a chunk weren’t dedicated to down-payment assistance.
Closing costs include items ranging from legal fees to title insurance and can add up, ranging between 2% and 7% of the loan value, according to Freddie Mac. So many buyers, especially those stretching to make a down payment, will be interested in having a seller help out.
In Phoenix, buyers in every price range have been asking that these costs be covered, according to Re/Max’s Ms. Ramsey. "They ask for it because they know that they’ll get it," she says.
Adding a Warranty
A residential-service contract is sometimes thrown in as an incentive because it acts as insurance for a home’s systems, often including plumbing, heating and cooling. At a cost of a few hundred dollars, some real-estate agents consider it an inexpensive add-on that affords a buyer a little extra peace of mind, Mr. Dalzell says. That peace of mind can be especially welcome during the first year in a house.
The Little Things
Other perks will appeal to buyers, too, ranging from the common to the unique. Payment of homeowner association fees — typically associated with condo developments — are sometimes offered. Ms. Ramsey says that a seller with a swimming pool might also offer a year’s worth of upkeep for it, a welcome help for those worried about the maintenance of the backyard attraction.
Or maybe, if a corner of the home was designed for a grand piano, leaving that instrument behind entices a buyer to go through with the deal, USC’s Ms. Conway says.
Some of these incentives could indeed be quite effective in helping a seller procure a buyer for their home. In the strong Manhattan market however, the best way to achieve that goal is to price the property properly. Should our market shift to more of a buyer’s market, I really like the idea of a seller offering to pay points to provide a buyer with a lower interest rate. That can add up to serious savings over the life of a loan.
As far as the other incentives go, the co-op market here in New York City makes most of these impossible. For instance, no Co-op Board is going to accept a seller assisting with a down payment. Having said that, none of this much matters under current market conditions as sellers still seem to have the upper hand in most cases.