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Today’s buyers buy into more incentives
Changing times call for changing measures, especially for builders and sellers competing for home-buyer dollars in a slowing market. Whether it’s a decorator’s allowance from sellers, a finished recreation room from a builder, or the promise of a new car from both, buyers today have plenty of incentives to choose from when they think about buying a home.
When homes sold in a matter of days, incentives were unheard of. But now, incentives have replaced the waiting lists and sellers competitively bidding on homes, as was often the case in the strong 2003-2005 seller’s market.
As inventories of available homes have grown, price- and nonprice-related incentives have moved from tantalizing to generous. Buyers have found new bargaining power.
“When you have a switch from a seller’s to a buyer’s market, it is absolutely mandatory for the seller to have the house in picture-perfect selling condition and to offer as many incentives as they can to beat out the competition,” says Jill Landsman of the Northern Virginia Association of Realtors.
Ms. Landsman says that homeowners are offering big-screen televisions, pool installations, closing costs and even what she calls “driveway jewelry” — cars, even pricey ones like Jaguars.
Just the same, new home builders are using promotional incentives to draw potential buyers to their communities in hope of boosting sales.
Housing analysts say that builder’s incentives are usually about 2 or 3 percent of the sales price, but in some markets the incentives are up to 5 percent.
Steve Mellman, director of economic services for the National Association of Home Builders, says builder incentives have definitely increased. A recent survey shows that in June, 56 percent of new-home builders were including options such as granite counters or upgraded kitchen cabinets at no charge. Only 40 percent of builders were doing so as recently as December 2005.
For example, Ryan Homes‘ Beechtree community in Upper Marlboro is offering $30,000 in options and $20,000 toward closing costs for new contracts. Drees Homes Co. in Maryland and Virginia is offering buyers half-price options up to a total of $40,000.
“There is so much competition out there, and everyone is offering the same thing,” says Tracy Eacho, sales counselor for Ryland Homes’ subdivision, the Vineyard, in Clinton. She says the incentives change monthly.
“Currently we are offering a finished lower level with a full bath, a choice of a wet bar or theater room and $30,000 in closing [costs],” Ms. Eacho says.
While the incentives have helped increase traffic, Ms. Eacho says that it remains a very competitive market.
Richmond American Homes Inc. is allowing prequalified buyers in select area communities to get the process started with just $5 in an earnest money deposit.
“I am finding that everything is negotiable,” says Michelle Vessels of Long & Foster Real Estate in College Park. “Inventory isn’t moving as fast, and builder incentives can include a finished basement, morning room, sunroom, closing-cost credits or credits toward upgrades.”
Techniques have gotten creative. Some builders are taking advantage of the warm weather and hosting neighborhood festivals centered around their model homes or sales centers, complete with moon bounces and face painting for children and raffle prizes for adults.
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