Before I jumped into residential real estate sales, I worked for a large Fortune 500 home builder. One lesson in practice I learned while in that career was the art of using incentives to entice buyers to buy. After all, everyone loves a “deal”.
No doubt, you have seen the advertisements rife with rhetoric: “Now is the best to buy,” and “Get $10,000 in free upgrades and incentives,” and so on and so on, ad nauseam. Builders use this marketing strategy to bring potential buyers in the front door and ultimately close the sale. Incentives help builder’s top numbers and stay in the black. The only trouble is, residential sellers get left behind in the wave of massive, jaw-dropping incentives, especially in a slow market. The secret to selling quickly in a slow market is finding the right incentive and using it the right way. When it comes to enticing a buyer to choose your home over the one down the block, three incentive strategies sway them your way.
Closing cost assistance
Buying a home comes with closing costs. Anyone who ever purchased a home understands this fact. For seller’s who genuinely want to sell, I have seen closing cost assistance work more times than not. The trick when using advertised closing cost assistance is to establish a price for the seller concession upfront. This is easier today than it has been in years prior, since the maximum allowable concession a seller can provide on most loans can’t exceed 6 percent of the sales price. Advertising 3, 4 or even 5 percent assistance with closing costs appeals to buyers, making your home look like the best deal in the neighborhood, and helping it compete with nearby builder deals and incentives too.
Builders use this lure regularly. They advertise higher commission rates to encourage Realtor business and enticing brokers to push for that sale, versus the competition. Traditional sellers have the option to employ this strategy to increase Realtor business and showings on a property. How much of an incentive to offer, however, can be a conundrum. One piece of advice: instruct your agent research other incentives from builders and comparable homes in the area and meet or beat those broker incentives for best results.
Sellers with smaller budgets or little to no equity can advertise free help with inspections, appraisals or a no charge option period. While these are the smaller fees when it comes to selling a home that certainly don’t match up with high Realtor commissions or closing cost assistance, but sometimes even small items can help.
Tips and Advice
Do not give away the farm. If you live in a highly desirable area, you may not want to implement incentives as much as you need to implement patience. Ultimately, the market is the market, and selling your home often has little to do with the marketing efforts of your broker or incentives if the market is slow. Speak to your agent about the attractiveness of your home and your neighborhood in contrast to surrounding options before resorting to advertising incentives.
Do not expect miracles or extraordinary profit when selling, unless your home is paid off. Sellers holding a mortgage can often have unrealistic expectations when it comes to setting a reasonable sales price. Two things sell homes: marketing and pricing. If you price the home according to market value, the feasibility of selling faster increases. Expect the need to reduce your price several times throughout the duration of the home sitting on the market before it sells.
Understand the mind of the buyer; what I mean by this is that you need to recognize that a buyer is going to ask for the sun, the moon, the stars, low prices, concessions and the kitchen sink in his first bid. You would do the same if you were a buyer. Don’t ignore low offers on your home. Instead, answer low offers by eliminating or reducing incentives in exchange for a lower priced bid, as this is a common step in negotiating a sale.
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The 3 Lies Your Real Estate Agent May, or May Not, Be Telling You