The housing market is shifting and, as usual, the changes vary, according to region. Some markets have fewer buyers viewing homes which is most likely the result of the rise in mortgage rates.
Others are sailing along in the familiar seller’s market (few homes available to a large pool of buyers), although not as heated as we’ve seen in recent years.
When there are more homes available to a limited buyer pool, we are considered to be in a buyer’s market. When you decide to sell your home in a buyer’s market, be ready for lots of competition from other home sellers.
There are many ways to make your home stand out from the crowd, including staging, updating, and good marketing practices. Offering incentives to buyers is another method of enticement, making the purchase of your home more attractive and affordable than the home down the street.
Let’s take a look at some of the more common incentives.
Closing costs
Title search and insurance, notary fees, HOA transfer fees, appraisal fees: these are all examples of closing costs.
“Average closing costs for the buyer run between about 2% and 5% of the loan amount,” according to Deborah Kearns and Barbara Marquand at nerdwallet.com. That represents a significant chunk of money for many homebuyers.
In fact, Kearns and Marquand crunched the numbers on a $300,000 mortgage and find that homebuyers can expect to pay between $2,000 and 16,000 in closing costs.
Offering to pick up some of these costs for the buyer can make a deal go through. Some sellers offer to split the buyer’s closing costs.
Lower the price
If the buyer is having trouble coming up with the down payment or closing costs, sometimes lowering the purchase price can be an incentive to continue with the transaction.
Not only does this help the buyer immediately by making the home more affordable, but it will assist him down the line when it comes time to pay his property taxes: lower cost equals lower taxes.
This is the incentive that keeps on giving; not a bad deal for the homebuyer.
Offer a home warranty
A home warranty is especially attractive to the buyer of an older home. In case you are wondering, home warranties cover most (but not all) major systems in a home, including heating, air-conditioning, water heater and electrical system. You can purchase optional coverage for pools, spas and other items.
Purchasing a home warranty for the buyer of your home assures her that, should something go wrong with one of these systems, she won’t be forced to spend a lot of money for repairs.
“In most cases, the annual average cost of a home warranty ranges from $300 to $600,” according to Andrew Dehan with rocketmortgage.com.
That cost can often be paid for out of escrow proceeds.
Keep in mind that “… home warranties have limits, and it’s important to note those limits before signing the contract,” cautions Meghan Wentland at bobvila.com.
The only items covered by the policy are those listed in the policy. “If it’s not on the document, it’s not covered, so never make assumptions that something is ‘probably’ covered,” according to Wentland.
Lending laws in some regions of the country limit or prohibit offering homebuyers incentives. Although we aren’t financial or legal experts, we are happy to share with you what we know about our market’s regulations.
