Home sellers enhance buyer incentives
Check out builder incentives
As quickly as the housing power shifted, the incentives that builders and home sellers use to market their homes have changed as well.
"The incentives today are different," says
Dianna Kokoszka, vice president of Mega Achievement Productivity
Systems at Keller Williams Realty. "The big-screen TV worked
for a home builder many years ago. Now builder incentives are $40,000
to $50,000 off landscaping in the front, new appliances, 1.5 points
if you go through our mortgage company and an allowance if you use
Case in point: This year, Prudential
New Jersey Properties launched its Power House buyer incentive package that includes
one year of an American Home Shield Warranty, a mortgage buy-down, a "closing
gift" of 0.5 percent of the sale price and a minimum 3 percent commission
to the selling broker.
Kokoszka says today's buyer wants money-in-pocket
value, not frills and playthings. If your home is competing with nearby new construction,
be prepared to offer the same or equivalent incentives as the builder.
happens with builders is, if you came in six months ago and bought a home for
$400,000 and I come in today and can buy that same home for $350,000 and your
home is not built yet and you haven't closed, you're not going to close easy and
we're going to have a problem. Builders have to keep that price constant or going
up," says Kokoszka.
"So if you bought for $400,000 and they know
I'm not going to buy for more than say $350,000, they will say things
like, 'If you go through our mortgage company, we'll give you $30,000
off the sales price and a $20,000 allowance at our decorator.' So
now, when we talk, I paid the same price as you and all of the Housing
and Urban Development settlement statements say the same thing."
"A consumer today is very savvy. They have lots of points of comparison for
neighborhood home value, some by the MLS and some free data. They are not impressed
by all the extras. A lot of the people who are leading the charge for incentives
have not been in real estate long enough to know you cannot do a lot of incentives
There's another challenge: Many of the
real estate agents who swarmed like moths to the hot housing market since 2001
may have never witnessed a down market.
"I have heard
that about 70 percent of all Realtors in the marketplace today have never experienced
a market that we are in right now," says Kokoszka. "They are used to
putting a sign in the yard and having five offers on the table the next day."
similar to the down market of the late 1980s, home sellers must now compete not
only with builders, but with foreclosures, thanks to all those subprime loans
you've been hearing about.