Real Estate

Sellers increasingly creative in offering incentives

CHICAGO — Flashy buyer incentives such as a new car parked in the driveway or a flat-panel TV might grab headlines but when it comes to actually enticing someone to buy a home it's the more practical perks that count, real-estate professionals say.

"Serious buyers are looking for a place to buy a home, not a trip to Tahiti," said Dave Ledebuhr, owner/broker of Musselman Realty in East Lansing, Mich.

On top of that, lenders are leery of gimmicky incentives, fearing that they're built into the price of the home and that loan dollars are being used to pay for that tropical trip, he said.

Instead, effective incentives get to the heart of what's on the minds of potential buyers — the overall cost of the home and the monthly payments they'll have to manage, Ledebuhr added.

Help in bringing down the interest rate of the mortgage for a year or two by paying points, for example, can go a long way in giving one home an advantage over another, said Dave Dalzell, owner-broker of Dalzell Realtors in Abilene, Texas.

Contributions to the down payment and common closing costs could especially be of help to a first-time home buyer, said Greg Zadel, owner of Zadel Realty in Firestone, Colo.

Incentives can be considered when the home is first listed as a way to distinguish it from the start, Dalzell said. They can be added when the home hasn't sold in two or three months as a way of enticing a buyer without lowering the cost. Or incentives could arise in negotiations, when a buyer needs that one extra little nudge to commit.

Make no mistake, the location and condition of a home are going to be its main selling points. But if sellers "put on their buyer's cap" and really consider what issues the buyer might have, it could make all the difference, Dalzell said.

"I tell my seller to look at his bottom line," said Susan Ramsey, a Realtor with Re-Max Integrity Realtors in the Phoenix area. A seller should figure how low he or she is willing to go, factoring in the selling price and other incentives used to get a buyer to commit.

But also be aware that most seller concessions need to be disclosed. "Everything should be in writing and attached to the contract," Dalzell added.

Here are some of the most common incentives being used in markets today:

REDUCING THE PRICE: A price reduction might be the most common buyer incentive, and often it is the one that is looked at first, said Delores Conway, director of the Casden Forecast at the University of Southern California's Lusk Center for Real Estate.

Gene Rivers, who owns four Keller Williams offices in Florida, agreed. If a buyer has in her mind that she'll pay $350,000 for a home and the seller won't budge from $375,000, "$5,000 in closing costs and a plasma TV ain't going to get it done," he said.

But those extra little perks can grab the attention of a buyer; they also might inspire a commitment from someone on the fence between two similarly priced properties, Dalzell said.

PAYING POINTS: Sellers can offer to pay mortgage points for a buyer, an incentive that Dalzell tends to use in environments such as today's, when rising interest rates are at the front of a buyer's mind. One point is 1 percent of the loan amount, charged as prepaid interest.

For example, instead of having an interest rate at, say, 6.5 percent, a seller might be able to pay points so that the rate is at 4.5 percent for the first year, Dalzell said.

A word of caution to buyers considering this tactic, however: This assistance doesn't last forever and usually spans one to three years. Before accepting, understand and plan for the time when the window closes and payments return to their normal levels.

HELP WITH DOWN PAYMENT: For some buyers, the hardest part of entering the ranks of homeownership is the down payment — also an area where a seller can help. It's mostly firsttime home buyers interested in this kind of assistance because they're often the ones lacking funds to complete a deal, Zadel said.

HELP WITH CLOSING COSTS: Closing costs include items ranging from taxes to title insurance and can add up, ranging from 2 percent to 7 percent of the loan value, according to Fred-die Mac. So many buyers, especially those stretching to make a down payment, will be interested in having a seller help out.