If you have a home to sell you might be considering some enticements to bring your buyer. What do I mean by this? Let’s look at some I have seen in our market over the last several years.
- Help with closing costs.
- Free TV.
- Free cruise.
- Free car.
- Buyer credit at closing.
- New this and that!
- Additional compensation to buyers agent (Brokerage).
Let’s look at each of these a little deeper to consider the pros and cons. Also remember that we are not even at offer and home inspection** stage yet, these are advertised offers to any buyer that brings you a contract to buy.
Help With Closing Costs
Likely to be the most helpful in the lower price points, especially if your buyer is a first time buyer, or a buyer starting out again after a short sale or foreclosure in the past. Buyers closing costs have increased quite a bit in the last few years. I would always want to know whether the buyers are taking advantage of any other closing costs programs or down payment resource programs first. (These exist in our market place now but few take advantage of them).
Lenders usually have guidelines about what can and cannot be given to help with buyers costs. There’s no fixed amount or percentage. Sellers listing agents are wise to find out from a buyers lender what will be permitted. A buyer could feel cheated if they do not get what they asked for with the offer, yet it might not be the sellers fault.
It is possible a property will not appraise if the price is bumped up to compensate for the closing cost credit.
This is what I call a throw away gift. It’s really of no value in a real estate transaction. I’m not saying the TV’s are worthless but the concept of bribing a buyer with one is laughable. After all if it’s what they really want, they’ll be at Best Buy or Walmart!
If they like your home, they’ll buy it with or without the TV.
I saw a lot of these kind of buyer enticements when the market was in trouble. I have not seen any in a while but the companies that provide them do seem to exist. Personally I see no plus side to this. Most buyers could care less and the fine print will show them the value of the cruise and the location of cabins is not premium at all. I think for the money they cost and the value provided, giving a buyer closing cost assistance is your better option.
Yes really! Again I have not see one in a while and the value is substantially more than a cruise. Usually the car was chosen and offered as a specific model. Does a free car really entice anyone to buy a property? Of course not. Your buyer may not like the car and may have to pay tax on it! They certainly are going to have to pay the title and license plate fees.
I would stay well away from this idea. I just see it as getting messy. Hopefully a seller would not be ramping up the property price to pay for the car. An appraisal would likely fail.
Buyer Credit At Closing
Similar to offering closing costs but usually this is a greater chunk of money. I just don’t understand the mentality of this at all. The truth is if you don’t have a buyer, the market has rejected your price. Wouldn’t it just make more sense to reduce your asking price and get some real buyers in looking at the property?
Lenders might have a big problem with this idea too. Everything involved in a real estate transaction must go on the settlement statement and the lenders have rules about how much they’ll allow. Start offering thousands and you’re heading for problems.
Again your appraisal may be too low. So your buyer not only does not get his chunk of cash, now he cannot even buy the house!
I appeal to you to not get involved in the financial side of a buyers purchase, it’s not in your control. All you need to understand is whether a buyer can afford the house or not. Don’t muddy the waters!
New This and That!
This is not something you should entice buyers with, it’s something you should already have done. If it needs doing, do it before you list for sale. If not adjust your price accordingly. Present your property as you wish and make the price suitable for condition.
When you list your home for sale, you’ll establish the brokerage fee and when it will be paid. So why now revisit this and start offering buyer broker bonuses? We are not the ones buying, it’s the buyers. As much as any of you desire, we may be able to lead the buyers to look, but we cannot make them buy. So buyer brokerage bonuses are a nice little extra when we get them but the chances are they have nothing to do with the sale of your property.
It’s also important for you to remember that the bonus goes to the brokerage not the agent. It’s the brokerage that determines who gets what from a client bonus, not you.
Get Real on Your Pricing.
Stop getting messy with frills and take a hard look at your price. From the start you should be looking at other similar homes sold, not what’s for sale. If you are high end for your area, understand your market time will be longer than the median or low end. Get your Realtor to give you average marketing times and establish how your price range contributes to that time.
Here in the Barrington area our prices are floating. I have not seen any indications of steady rising, just better demand and shorter marketing times. It’s always a little difficult in a semi-custom home market to establish price rises, especially in the short time. We don’t have cookie cutter homes here. So sales are a guide but you may still need to adjust down as time passes.
**I mentioned earlier about the home inspection. Why? Because rarely does a home get sold with no remedies to be done or monetary credits to be given to the buyer. If credits are agreed this could affect lender approved amount that we were talking about. So be prepared to do one thing. Drop the contract price! Wouldn’t it have been better to start there instead of ending there?
Remember if you do not get an offer you have a problem. The market is rejecting your price. All the incentives in the world will not sell the property. Get more buyers in by reducing your price. It is the best enticement in the world.
If you would like a honest assessment of a sales price for your home, ask to see comparable sales. We’ll be happy to provide them for your future sale, just call Corinne at 847.363.3686.