How to spruce up a listing by offering the right incentives..

In today’s market, it’s pretty easy for a seller to find themselves in a serious state of stuck: home stuck on the market with no bites from buyers, and family stuck in the home until the home sells. And that doesn’t even account for the feeling of stuck that comes from having gone just about as low as you can go on price without turning your transaction into a short sale. If you’re trying to sell, and you’ve lowered the price but still find your home struggling to compete against a bunch of other, similarly priced homes with similar features, selling can seem difficult at best, impossible at worst. The worst part of this particular flavor of stuck is the feeling that the whole situation is out of your control, that there’s nothing within your power that will move your home off the market.  You’ve already painted the place, replaced the carpet, tricked out the curb appeal and lowered the price as far as you can go.  So what else is a seller to do?

Offer incentives.

Incentives are perks - they can be big or little - that a seller offers to their home’s eventual buyer.  The most outlandish incentives are the ones that make the headlines, like the Ferrari one Malibu owner threw in with the sale of their condo last year, or the year’s worth of cookies that actor George Hamilton reportedly negotiated into the sale of his home from a bakery owner.  But the incentives with the most power to get your home sold tend to be much less exciting perks that actually fill a real need the average home buyer has.  

Here are four basic, incentives you should consider offering if you’re having a hard time getting your home sold:

1. Interest rate buy-down.  When you hear sellers say they will “pay points,” what they are doing is offering to award the buyer a certain number of percentage points of the sales price, which will, in turn, be paid to the buyer’s lender as discount points that bring the buyer’s interest rate down. For the buyer, this is a big deal, as it decreases the pressure they feel to guess the right day to lock in their interest rate (a common source of serious stress among buyers), and sends the message that if they buy your home, they’ll automatically beat the market rate.  And what buyer doesn’t want that?!

Seller-paid rate buy-downs also save buyers money on their monthly payment over the entire lifetime of their loan, and the seller-paid points are usually tax deductible, to the buyer, the next time they file taxes. You can see why these incentives are so powerful at attracting buyers!

2. Closing cost credit.  Many buyers trying to break into the market while prices are low are already scraping the bottom of their savings account barrels to come up with their down payment money.  With most home loans, the buyer will have to come with anywhere from 3 to 6 percent of the loan amount, in cash, on top of their down payment, to cover closing costs like loan fees, escrow services and title or mortgage insurance.  (And strangely enough, the buyers putting the 3.5 percent minimum down payment on an FHA loan are likely to have to come up with the higher end of the closing cost range, 6 percent, to cover their mortgage insurance.)

Some smart sellers (and their agents) include in their home’s listing and marketing materials the offer to pay a credit of 3, 4, 5 or even 6 percent of the home’s sale price at closing, to defray the buyer’s closing costs. A closing cost credit is a great financial help to buyers and a strong differentiator that can make your home much more attractive than nearby listings.  Your listing agent can help you run the numbers on how much of a credit you can afford to offer, and how to make an overall package - listing price and credit - that will be maximally magnetic to prospective buyers.

3. HOA dues credit.  If you are selling a home that is in a homeowners’ association (HOA) that charges monthly or even annual dues, then surely you recall buying that home and being overwhelmed at the prospect of going from rent being your sole monthly housing expense, to having a laundry list of expenses starting with your mortgage, including property taxes and insurance and then having HOA dues as the unpleasant cherry on top.  

One way to overcome that concern in the minds of buyers and to differentiate your unit from all the other, similar units for sale in your complex is to offer a credit at closing that covers the buyer’s HOA dues for 6 months, a year, or even longer.  Talk with your agent about how to do this strategically, in a way that will offer the maximum lure for buyers but will not run afoul of any guidelines for seller credits imposed by the buyer’s lender.

4. Broker incentives.  Some savvy sellers who can’t afford to offer buyers several percentage points’ worth of the proceeds of sale toward closing costs take a different route, offering to pay a bonus percentage point (or more) in incentives to the eventual buyer’s broker or agent - on top of the commission, rather than to the buyer themselves.  Over 90 percent of buyers who are ready, willing and able to buy a home on today’s market are represented by a broker.  And brokers have to sort through sometimes hundreds of pretty similar listings to decide which ones to show a buyer any given Sunday. 

The value of a home inspection

Why you should get an Inspection Whether you are buying or selling a home, you should have a professional home inspection performed. A home inspection will look at the systems that make up the building such as: Structural elements, foundation, framing etc Plumbing systems Roofing Electrical systems Cosmetic condition, paint, siding etc If you are buying a home, you need to know exactly what you are getting. A home inspection, performed by a professional home inspector, will reveal any hidden problems with the home so that they may be addressed BEFORE the deal is closed. You should require an inspection at the time you make a formal offer. Make sure the contract has an inspection contingency. Then, hire your own inspector and pay close attention to the inspection report. If you arent comfortable with what he finds, you should kill the deal. Likewise, if you are selling a home, you want to know about such potential hidden problems before your house goes on the market. Almost all contracts include the condition that the contract is contingent upon completion of a satisfactory inspection. And most buyers are going to insist that the inspection be a professional home inspection, usually by an inspector they hire. If the buyers inspector finds a problem, it can cause the buyer to get cold feet and the deal can often fall through. At best, surprise problems uncovered by the buyers inspector will cause delays in closing, and usually you will have to pay for repairs at the last minute, or take a lower price on your home. It's better to pay for your own inspection before putting your home on the market. Find out about any hidden problems and correct them in advance. Otherwise, you can count on the buyers inspector finding them, at the worst possible time.

Setting the RIGHT list price

Setting the Sales Price Before we set the sales price of your house, I'll run a Comparative Market Analysis (CMA) that will show the listing price of similar houses in the area as well as the prices at which the houses actually sold. Additionally, the analysis will give us information about houses currently on the market and about houses that were on the market but never sold. Next, I'll ask you about your goals in selling the house. Everyone who sells a house has different goals that need to be factored in when calculating the selling price. Is your goal to get the maximum sales price for your house? If so, are you willing to have your house on the market for many months? Is your goal to sell your house quickly? If so, are you willing to sacrifice some of your potential profits to sell more quickly? Would you like to establish a balance between selling your house quickly and selling at the top end of market value? Market conditions will play a role in setting the sales price of your house. I'll factor in how quickly houses are selling in your area, interest rates, the strength of the school system, and finally whether it is a buyer's or seller's market. I'll then recommend a price at which to list your house to meet your goals in the local market.