Incentives in sales have been around a long time, but never in our experience have they been so prolific as they are now in our industry. They come in a variety of forms- from whopping selling fees for the selling agent to give-aways for the Buyers. It is important to evaluate the nature of the incentive and what it really means to a Buyer.
A free trip, luxury car, or plasma television are always welcome ... as long as they are truly free. If the Seller won't come off of the $325,000 purchase price for a $300,000 home, a $5,000 television isn't going to change a Buyer's mind. Most noteworthy incentive programs are by builders marketing entire subdivisions. It is important for them to maintain their higher "comp" values for the rest of their project, and to protect their customers that have already bought. Some incentive packages of this nature are quite substantial, but not of public record. It is important for Buyers and Sellers to know what is really going on in those situations since those sales aren't indicative of the real market. The effective price the Buyer is really paying is much less than the public records show. It isn't necessary for the typical homeowner to camouflage their reduced price - market is as market is.
Homemade auctions that have made the internet rounds recently offer a different type of incentive - a very low starting price. The Buyer thinks he can steal a home at auction. The Seller is told he can sell his home in 5 days. When they come together and the Buyer won't pay market and the Seller has a reserve it has proven to be disappointing for all parties. We have an agent friend that does real estate auctions on a national level with a professional auctioneer. They have a specific formula that works for unique properties - not something to appease a frustrated Seller in a typical residential market.
Extreme enticements have become interesting of late. Consider the couple offering that the Buyer of their home be the beneficiary of a $500,000 life insurance policy on the Sellers. If the Sellers die within 10 years of the close of escrow the Buyer will receive $500,000, the price of the home. Then there is the essay approach to selling - prospective Buyers submit an essay and $100. The essays are reviewed by an impartial panel and a winner declared who is then deeded the house. The essay funds are held in an escrow account until either there are enough submittals by the deadline, or they are returned to the submitters.
Our Advice: Enticements are designed to generate traffic or interest, but it is important to remember what is really on Buyers minds ... the cost of their home and their monthly payments. Price is something that appeals to everybody - price your home right. No gimmick will overcome price in this market. If you want separation in the market, and you are priced right, consider a good faith gesture incentive, i.e.- lawn service for a year, pay a year's Homeowner's dues, or buy a Home Warranty. Really want to reach a Buyer? Help buy down their rate for the term of their loan, pay some of their closing costs, or contribute to their down payment. These are real items that will benefit every Buyer where they are most sensitive right now ... in the wallet.
Serious Buyers are looking to buy a home, not a trip or new car. Sellers don't show your desperation by jumping on the incentive bandwagon. Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, www.carsonvalleyland.com, 775-781-5472.
