Lew Sichelman
Sometimes, homebuyers are hesitant to pull the trigger. They might love the house they found – it’s priced right and mortgage rates are coming down – but they just can’t decide whether to move forward.
So what can sellers do to sweeten the pot a bit – to get buyers to make an offer and sign a contract, especially as we head into what’s often the slowest selling season of any year?
In previous down markets, sellers have offered all kinds of incentives to seal the deal with hesitant buyers. They’ve thrown in trips to Europe, island cruises, even fancy sports cars. And they are likely to do so again, at least in the luxury sector.
Those are nice, to be sure. But let’s get real: They hold little sway with the typical buyer. (Besides, the insurance on those sports cars can be just as breathtaking as a drive down Pacific Coast Highway with the top down.)
On a more practical note, here are some incentives and concessions sellers might want to consider.
The Money, The House
First and foremost: buy-downs. The majority of builders now offer to cover the cost of lowering a buyer’s mortgage rate for the first year or two. And individual sellers can do the same. It works!
At a cost to you of roughly 1 percent of the sales price, you can cut the buyer’s rate by 0.25 percent for the first 12 months. Pay a little more, and you can trim their rate further, and for longer periods.
According to an analysis by Zonda Home, half of all builders are willing to buy rates down to as low as 4 percent. Whether you need to go that far – or can afford to – is for you to decide. To determine the actual costs, sit down with your agent or mortgage broker and run the numbers.
Speaking of low rates, if you already have a low-rate mortgage, find out if you can pass it on to your buyer. Loans insured by the Federal Housing Administration and backed by the Department of Veterans Affairs can be assumed by another borrower, and so can some other mortgages.
Check with your lender to ascertain whether your loan can be taken over. If it can, advertise that fact. After all, a mortgage at 3 percent, 4 percent or even 5 percent is extremely attractive in today’s market.
Then, there’s the matter of what you’re trying to sell. Savvy sellers have their homes inspected – and get any flaws fixed – before putting them on the market. And savvy buyers will want their own inspections before moving forward. So why not offer to pay the cost of the buyer’s inspection?
If the buyer’s inspector turns up some real problems your guy missed, offer to pay for at least part of the repairs. Of course, if the second exam turns up nothing, you are off the hook.
Most buyers now expect the house to come with a seller-paid warranty that lasts for a year. When the year is up, the warranty company will badger the new owner about the benefits of renewing – but by then, they’ll have to pay the freight. So throwing in an extra year or two of coverage could be meaningful.
Get to a Deal Quickly
If you want to get to the settlement table quickly, offer a credit at closing as an incentive. On the other hand, if the buyer wants to proceed more slowly, allowing them the time they need may make a difference.
Also think about closing costs. Buyers will have to pay a slew of settlement fees and charges that add up to anywhere from 5 percent to 7 percent of the sales price. Sellers will have to pay some fees, too. But if you offer to take some of the burden off your buyer’s shoulders, it could be just what the doctor ordered.
If your community is run by an HOA, think about paying the buyer’s dues for a year or longer. That will help ease their first year’s costs, which can be substantial, especially for a first-time owner. Some homebuyers don’t even realize they’re becoming default members of the HOA and that they have to pay dues – whether or not they use the golf course, pool or exercise room.
Sometimes concessions are really sweeteners. If the buyer has an eye on something in the house that you had planned to take with you – say, your favorite leather couch – consider letting it go. If they want it bad enough, it may be enough to seal the deal.
You could also offer to pay some or all of the buyer’s moving costs, which can run several thousand dollars. Moving from one residence to another is daunting enough without worrying about how you are going to pay for it.
And of course, think about agent commissions. Nowadays, buyers are obligated to pay their agents, just like you are obligated to pay yours. So consider paying the buyer’s agent on their behalf (which is the way it used to be, anyway).
Remember, in real estate, everything is negotiable. Everything!
In short, any cost you can take off the buyer’s shoulders is a good thing.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
