Your search results

Top 5 Incentives for Home Sellers

Posted by kim carpenter on April 25, 2008
| 0

Just when it seems housing news can’t get any worse, media reports surface regularly that cast an even longer shadow over an already doom-and-gloom sales market. By now, most home owners already know there’s a glut of properties on the market this spring and that they’re competing with banks, auctions and highly motivated sellers for what seems like a shrinking universe of buyers.

As of March 2008, there were nearly 4 million homes for sale in the U.S., up one-third from just two years prior.

But home sellers needn’t compete with another opponent: common sense. Just because sellers have shifted into survival mode does not mean they need to push the panic button as well, say real estate veterans who’ve endured previous down cycles.


To many, desperate times seem to call for desperate — and increasingly bizarre — measures and incentives. One seller threw in his classic 1967 Pontiac GTO to seal a deal. Some family members found themselves wearing “Buy my house” T-shirts with their home’s own Web address on the back. Others have resorted to faith-based home marketing, buying $10 St. Joseph Statue Home Sales Kits, featuring a small plastic statue of the saint that owners are supposed to bury under for-sale signs. (If you’re into that sort of thing, the company’s phone number is 1-888-bury-joe.) One woman in California offered to bake cookies for a would-be buyer every week for a year, says journalist Ben Jones, author of “The Housing Bubble Blog.”

Thousands of distressed owners have turned to short sales or discounted payoffs, where the lender is asked to accept less than the total amount due — only to sometimes find that lenders won’t accept these offers if it makes more fiscal sense for them to foreclose. Others owners are requesting that lenders restructure their loans or accept delayed-payment arrangements, oft times discovering that lenders are surprisingly accommodating in order to avoid taking back properties in a declining market.

But before they even get to that point, many buyers have considered offering a litany of incentives to sweeten the pot in this buyer’smarket. Two distinct sets of guidelines seem to be emerging for sellers: one for those who need to sell almost immediately and another for slightly less-pressured sellers.

Tips for Frustrated Sellers

For owners who absolutely, positively must sell, and can’t bear the thought of simply relinquishing the keys to the lender, here are some of the current incentives and strategies in use:

Toting the note: Offering buyers seller-financing “carry-back loans,” which are essentially mortgages or loans financed by the seller, sometimes done in conjunction with “zero down payment” incentives. This can be risky. Sellers have found that it’s to their advantage to partition this “carry back” into first and second lien-trust deeds. That prevents the new owner from obtaining additional financing that would weaken the home’s equity position in the event the seller is forced to repossess the home. This works best of course if the home does not have an existing mortgage, many of which contain “due-on-sale” clauses, meaning the mortgage has to be paid in full if ownership is transferred. Many lenders, however, recently have been passing up their right to invoke the clause because they’re happy that the payments are still being made. But this could be risky and you might try discussing it with the lender and seeking written approval.

Cash-back offers: These include offering to pay a year’s worth of property taxes or even a year’s worth of mortgage payments. Also increasingly common are “cash-back” offers that can be credited toward buyer down payments, repairs, landscaping, closing costs or mortgage points.

Glamour and glitz: Exotic vacations, timeshares, cars, season tickets for professional sports or even the opera, art, high-definition TVs, thousand-dollar gift cards for gasoline, all-appliances-included and even mineral rights (often worth $3,000 or more per quarter acre in some markets).

Lease-to-own options: This can be a motivator for tentative buyers who fear the market will drop further or for buyers who are short on down payments or who can’t get traditional financing in tightening credit markets. Option structures differ greatly. A rent-to-own agreement, also called “lease-to-own” or “lease-purchase,” is generally a binding agreement to buy a home at a set price at the end of a set period. It offers a little better security for the seller. A lease-option arrangement gives the renter a legal buy-option after a given period, but isn’t an obligation.

“Mr. Big” of incentives — proper pricing: “It’s pretty simple,” says William E. Brown, president of the California Association of Realtors. “A home is going to have to be priced correctly in relation to comparable sales as they exist today, not the 2004-2005 pricing that your neighbors got. Incentives and everything else take a back seat to this.”

The Value of Staging

The biggest incentive packages are being offered by builders, Brown stresses. While many of those can add up to tens of thousands of dollars in the form of price breaks, throw-ins, credits and add-ons, buyers should be wary that the biggest home-value drops are also occurring in areas where there has been an abundance of new construction. Incentives offered by owners in more established, mature markets carry more relative weight, he notes.

There’s a Catch-22 aspect to this, however. Too many concessions and incentives have a tendency to make buyers suspicious, says veteran Realtor Barb Schwarz, author of “How To List and Sell Residential Real Estate Successfully” and “Home Staging: The Winning Way to Sell Your House for More Money.” “Buyers think: If they’re going to do that, then they must really be desperate,” she says. “And then they think, ‘What’s wrong with this house?'” When it all boils down, two things really sell a house, she says. “One is pricing and the other is staging.”

Schwarz, who has sold more than 5,000 homes in her career and is considered a pioneer in the home-staging movement, says many homes languish on the market because they are cluttered, dirty and poorly presented and have been branded as tough sells by agents. “The agent doesn’t want to show these because they are embarrassing and feel they are wasting people’s time,” she says.

The average investment in home staging — about $2,200 — costs far less than a price reduction on the average home, she says. Staging focuses on relatively simple touches that Schwarz calls the “three C’s”: cleaning, clutter removal and colors, the latter “C” calling for mostly neutral colors with splashes of bright accents thrown in for balance, she says. “Staging doesn’t conceal, it reveals,” she says. “No one will purchase your home unless they can imagine themselves living there.”

A 2007 survey by of 2,000 real estate agents in all regions of the U.S. indicates that staging a for-sale home nets a 343 percent return on investment. A survey of 400 homes in the U.S and Canada by Schwarz’s own firm,, says that homes prepped for sale by an accredited staging professional sold in an average 31.8 days compared with 161 days for non-staged homes.

Tips for Less-Pressured Sellers

Here are some tips and additional incentives for sellers who foresee selling in the next year or so and have the luxury of more time to adjust to the changing markets:

Offer a more inviting home atmosphere: Stage it left and right (see above). A well-staged home — perhaps with feng shui treatment — becomes a psychological incentive for the buyer, giving the home a more positive energy, Schwarz says. “Once somebody stages and gets top dollar for their home, they will do it for the rest of their lives.”

Selectively refurbish: Present all remodeling and other home-improvement receipts to potential buyers to help illustrate recent improvements. According to Remodeling Magazine’s 2007 Cost vs. Value Report, a minor kitchen remodel recoups 83 percent of its cost in a home sale, as does a siding replacement (85 percent of cost is recouped). Even if improvements don’t fully pay for themselves, they will help sell a house, Realtors say. Homeowners are showing less willingness to use their home equity to remodel in the current housing slump, according to recent research by Harvard’s Joint Center for Housing Studies. That means good rehabbers are more readily available for work and a little more amenable to negotiation.

“Incentivize” the right agent: There’s a natural tendency for sellers to negotiate lower commissions in a flat market. However, some of the more serious sellers have added 1 percent to the customary 3 percent their listing agent would get in a traditional 6 percent split with the buyer’s agent — even tossing in a cash bonus for an executed sale. In this market, hire and motivate the best if you want the best results.

Lead the market: Incentive yourself, says “Bubble” blogger Jones. “Don’t chase the market down,” he says. “It’s a natural tendency, but if a seller will recognize how these cycles work, getting out ahead of the competition is the only way to get the place sold.”

Become a market researcher: Get on the Internet, read and business-journal stories, real estate blogs and newspapers. Chat up several Realtors. Learn where the biggest home-inventory backlogs are and where there have been an abundance of foreclosures and new construction. “A lot of areas that haven’t been hit as hard are areas that have not seen new construction,” Brown says.

Forget the incentives and just sit a spell: “If you’re not happy with the current pricing, it’s probably not the right time to sell for you if you don’t have to sell,” Brown says. “Don’t come out expecting 125 percent of market because your home will be ignored.”

Andrea Geller, a Realtor with Sudler Sotheby’s International Realty, summarizes: “The numbers are what the numbers are. The big challenge is getting the buyer and seller engaged in negotiations. There was a period when the buyer was not engaging in the market. That is changing this spring. We are finding that there really is a real estate (buying) market out there.”

Copyrighted, All rights reserved.

Leave a Reply

Your email address will not be published.