By KAMIL SKAWINSKI
bankrate.com
24-AUG-06
Time was that when you heard of a home being offered for sale with a discount or some other generous bonus, your first thought was, "OK, so what's wrong with it?" But with prices leveling off and properties now staying on the market much longer than they used to, it's becoming more common to find lucrative incentives offered on both newly built and existing homes.
Of course, everything depends on whether you're house hunting in a real estate market that has cooled. But if you're in the right place at the right time, you could wind up getting considerably more than you bargained for _ in the best possible sense _ when you make an offer on a home.
Incentives on new homes
Tom Stevens, president of the National Association of Realtors, says home builders started offering incentives in cooling markets such as certain parts of Florida, Las Vegas, California and the Northeast. "Home builders were among the first to react with various incentive programs and promotions to help keep their properties moving and to reduce unsold inventories," he says.
High-end kitchen cabinets and counters, upgraded bathrooms, generous hardwood flooring packages, finished basements and professional landscaping are just a few of the common gratis offers Stevens has heard of. "And good old-fashioned discounts and cash incentives ranging between $25,000 and $50,000 are out there, too."
Three-quarters of the 369 homebuilders recently surveyed by the National Association of Home Builders said that they are now including once-expensive extras at no additional cost to help sell their homes. One-third reported that they are now also absorbing such costs as financing points on mortgages to help move unsold properties. Several even admitted to offering free vacations.
Real estate analyst Jack McCabe, of McCabe Research and Consulting in Deerfield Beach, Fla., says that desperate developers in South Florida, for example, are now offering potential buyers a host of generous incentives, in one case even the free use of a yacht. "Our area's incentives really vary by market and product type, so we're seeing just about everything today _ points and closing costs being paid by sellers, upgraded trim and generous kitchen appliance packages, one year of (paid) condo fees, big-screen plasma TVs being thrown in for free, even ... limousine service both to and from the airport whenever you need it."
McCabe says he's seen sellers offering higher commissions _ "in ranges from five to 12 percent" _ to get a higher level of service from real estate brokers.
Generous incentive packages can even be found in the conservative Midwest. Buyers purchasing lots in the high-end subdivisions of Bavarian Woods, in Germantown, and Weston Highlands, in Brookfield, through Wisconsin-based Simon Group, can choose between a brand new Mazda Miata convertible or a $20,000 rebate.
"This year, there's definitely a lot more negotiating and discounting going on with most builders in our area," says David Balcerzak, vice president of sales and marketing at Pulte Homes in Detroit. "But our company has taken a different approach. We're taking a much closer look at our potential buyer's situation and asking what we can do to help offer them a solution."
For instance, one of the biggest hurdles new home buyers now face is selling an existing home. To help them, Pulte (through its own mortgage company, Pulte Mortgage) has implemented a special program which basically covers three to six months of buyers' existing and new mortgages, both interest and principal, plus tax payments so that these customers aren't stuck with the pain of making twin payments on two properties.
Incentives on existing homes
While builder-incentive programs have attracted the most attention, developers aren't the only ones to offer inducements. More home sellers today are also including tempting freebies that go well beyond the usual appliances, fixtures and window treatments. Typical incentives can include assisting a buyer with closing costs, paying points, covering homeowners' association fees for a year or more or selling the home with a comprehensive warranty.
"If you're a reseller, your only real option is to price your house in a way that will sell, which is in itself an incentive," says Sacramento-based Re/Max Gold agent Loren Ransier.
But if you aren't quite ready to make a home-buying decision right now, you probably need not fear missing out on today's generous deals.
"This whole thing with incentives is really just starting now," says McCabe. "There's no telling what types of very creative marketing offers we're going to see in the next couple of years."
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The benchmark 30-year fixed-rate mortgage fell 3 basis points to 6.48 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.32 discount and origination points. One year ago, the mortgage index was 5.86 percent; four weeks ago, it was 6.77 percent.
The benchmark 15-year, fixed-rate mortgage fell 4 basis points to 6.19 percent. The benchmark 5/1 adjustable-rate mortgage fell 4 basis points to 6.24 percent.
(E-mail Kamil Skawinski at editors(at)bankrate.com.)
(Distributed by Scripps Howard News Service. E-mail Holden Lewis at hlewis(at)bankrate.com)
