Building Buyer Incentives Into Your Exit Strategy

Need to unload a property sooner rather later to avoid holding costs?  Or are you representing a seller that needs to unload a property and needs a competitive edge?

Condition and price are always deal breakers.  Clean-up, finishing details, and staging can take a property up several marketable notches.  However, sometimes you simply need something more to sweeten the deal and distinguish your property from the competition.

 

Here are a few suggestions:

• Offer to buy the rate down. As a seller you can put money towards lowering their interest rate for a fixed or temporary period of time.  Even FHA buyers can go for a FHA 2/1 Buy Down.  Simply, this FHA product allows borrowers the option to buy down the interest rate for two years.  They still have to qualify by all the standard FHA rules.  The really cool part about this product is that seller concessions can be used to fund the buy down account.Buying down the rate can make an unaffordable mortgage payment affordable for a short while.  Even though the payment will increase over time it gives the buyer time to improve their situation to cover that cost difference.  Remember that buyers don’t think about the contract purchase price as much as they think about the monthly payment.  Car salesman use this method to sell cars all the time.  Retail owner-occupant buyers tend to think about the “now” and not the end-cost.

• How about cash-back rebates? In all but 10 states can you offer rebates to the buyer.  [For a list of states that allow rebates go to http://www.justice.gov/atr/public/real_estate/rebates_details.htm ] How many buyers would love to get maybe has much as 1% of the buy-side commission as a closing gift?  It can be used to pay for the moving truck, move-in repairs, new furniture, who knows….

• Think Value-Ads. Is your property screaming for landscape lighting, an entertainment system, flat-screen TV, stainless sub-zero fridge, custom closets, custom landscaping…..?  Buyers will sometimes seal the deal simply for a superfluous and fastly depreciating feature.  They get so googli-eyed over the golf-cart that “comes with the house” if their offer is highest and best that they quit caring about price.   Other value ads can be extended home warranties.  We suggest buyers plan on leaving furnishings or features that make the home unique.  For example, in a home with a nice outdoor kitchen, the seller should think of leaving all the appliances, entertainment features, and furnishings they used to make that outdoor kitchen full functioning.  This will be a plus to a buyer who would have to spend the money to enjoy that space should they not own similar items.

• Think of the power of FRENZY. Creating a limited time exclusive opportunity to submit the highest and best offer on a property can drive interest.  Once you create an event like this, then you  must think  about saturating the interest.  You only need one qualified buyer.  But, if you create a single afternoon event to ‘win’ a house, and that one buyer sees lots of other buyers there asking questions, they will often bid high to lock in a perceived (albeit legitimate) deal.

• Seller Financing: An easy way to increase the pool of potential buyers for your property is to offer seller financing.  In seller financing, the seller becomes the bank.  A seller, unlike a traditional bank, may offer a loan to a buyer that cannot qualify due to credit score, work history, prior bankruptcies, etc… Because buyers with past indiscretions cannot qualify for a traditional loan, this is also a great opportunity for a seller to make a sold return by charging above market interest rates.  You may be able to negotiate a higher price from buyers who are desperately seeking financing who are emotionally vested to the property.  You can seller finance even if you have an existing mortgage. If you would like more info on seller financing…contact me through Ask an Expert and we will address that in another article on Creative Real Estate Daily— please like us.

• Down-Payment Assistance : There are ways to assist a homebuyer by helping them with a down-payment using gift assistance programs.  You cannot just give a buyer down-payment funds.  This may affect the bottom-line financed price.  Lenders will not allow gift funds that result in a loan that exceeds the appraised value of the home.  Ask your lenders for help with the purchase offer wording to ensure compliance with their underwriting guidelines.

• Help With Closing Costs: Closing costs can be costly for a buyer.  Offering closing cost concessions is great way to encourage buyers to contract your home versus another.  It is not unusual to offer 3% to buyers using conventional financing and even up to 6%  or more for other loan types. USDA doesn’t have a cap.  The lower the price point of the home the more percentage a buyer may need.  As you increase in purchase price, closing costs don’t increase at the same rate and a smaller percentage offer may be just as appealing.

No get out there and sell those properties!!!!!!

To your short sale …..to your real estate success!