Incentives are perks – they can be big or little – that a seller offers to their home’s eventual buyer. Incentives with the most power to get your home sold tend to be perks that actually fill a real need the average home buyer has.
Having a hard time selling your home? Consider the following four basic incentives to help sell your home.
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. 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!
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.
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.
Broker incentives. Some 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. Offering a broker’s incentive makes your home stand out among all those listings to the brokers and agents who potential buyers your home. While these aren’t “buyer incentives,” strictly speaking, but they do operate to boost the number of buyers that come view your home – in turn, boosting your home’s likelihood of getting an offer.
Think offering an incentive might be the right path to help get your home sold in today’s tough market? Contact Main Line Realtor Kevin Toll at 610-609-1096 or email kevin.toll@longandfoster.com to get more information.