Dos and Don’ts of Homebuyer Incentives - By: G. M. Filisko

Dos and Don’ts of Homebuyer Incentives

By: G. M. Filisko

Published: September 1, 2010

Homebuyer incentives can be smart marketing or a waste of money. Find out when and how to use them.

When you’re selling your home, the idea of adding a sweetener to the transaction—whether it’s a decorating allowance, a home warranty, or a big-screen TV—can be a smart use of marketing funds. To ensure it’s not a big waste, follow these dos and don’ts:
Do use homebuyer incentives to set your home apart from close competition. If all the sale properties in your neighborhood have the same patio, furnishing yours with a luxury patio set and stainless steel BBQ that stay with the buyers will make your home stand out.

Do compensate for flaws with a homebuyer incentive. If your kitchen sports outdated floral wallpaper, a $3,000 decorating allowance may help buyers cope. If your furnace is aging, a home warranty may remove the buyers’ concern that they’ll have to pay thousands of dollars to replace it right after the closing.

Don’t assume homebuyer incentives are legal. Your state may ban homebuyer incentives, or its laws may be maddeningly confusing about when the practice is legal and not. Check with your real estate agent and attorney before you offer a homebuyer incentive.

Don’t think buyers won’t see the motivation behind a homebuyer incentive. Offering a homebuyer incentive may make you seem desperate. That may lead suspicious buyers to wonder what hidden flaws exist in your home that would force you to throw a freebie at them to get it sold. It could also lead buyers to factor in your apparent anxiety and make a lowball offer.

Don’t use a homebuyer incentive to mask a too-high price. A buyer may think your expensive homebuyer incentive—like a high-end TV or a luxury car—is a gimmick to avoid lowering your sale price. Many top real estate agents will tell you to list your home at a more competitive price instead of offering a homebuyer incentive. A property that’s priced a hair below its true value will attract not only buyers but also buyers’ agents, who’ll  be giddy to show their clients a home that’s a good value and will sell quickly.

If you’re convinced a homebuyer incentive will do the trick, choose one that adds value or neutralizes a flaw in your home. Addressing buyers’ concerns about your home will always be more effective than offering buyers an expensive toy.

More from HouseLogic

Setting the right home price

Using an appraisal to set your home price

Choosing the right offer on your home

Other web resources

More on homebuyer incentives
G.M. Filisko is an attorney and award-winning writer who gritted her teeth and chose a huge price decrease over an incentive to sell a languishing property—and is glad she did. A regular contributor to many national publications including Bankrate.com, REALTOR® Magazine, and the American Bar Association Journal, she specializes in real estate, business, personal finance, and legal topics.

 “Visit HouseLogic.com for more articles like this. Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®."

 

Buying a Short Sale - Short Sales sometimes fail to appraise

The risk of a low appraisal is always a concern - even when you know the price on the contract is strong.  Maybe it is just the uncertainty of the home buying and financing process.

A low appraisal is especially a risk in a declining market.

In a short sale the decision to approve or not in the past has taken so long it is possible the price offered may in fact be above the market at acceptance an appraisal.

Fannie Mae and Freddie Mac will be implementing rules effective June 2012 that will require a decision within  30 days (60 days if negotiating with a mortgage insurer is involved).  This may speed the process along and help keep the appraisal in line with the market.

For now, let me see where today's appraisal goes!  And if a short sale fails to appraise there are options to consider.