- The Washington Times - Wednesday, November 8, 2006

Home sellers and their agents are combining creativity with tried-and-true marketing techniques to promote properties in this softening market.

Sellers who watched home prices climb in their neighborhoods last year must adjust their expectations, recognizing that rather than watch buyers wrestle over their home, they must woo buyers with price reductions, offers of cash and sometimes even cars or vacations.

At the Oct. 19 Northern Virginia Association of Realtors Convention and Trade Show, a presentation delivered by broker David Howell of McEnearney Associates in McLean showed that more than half of all properties going under contract in Northern Virginia in September had a price reduction from the original asking price.

The average price reduction for those homes: 8 percent.

Real estate professionals agree that price reductions are a successful technique for attracting buyers. A few agents say they find that more unusual incentives work, in part because of the sophistication of consumers in the Washington area.

“We have an intelligent market here,” says Donna Evers, a broker/owner with Evers & Co. in Washington. “It’s expensive, but people are thoughtful, and they are using their heads. They will do some comparison shopping before they buy, but once they see the value in a home, they will make an offer.”

Realtor Sharyn Goldman of Long & Foster Real Estate’s Bethesda Gateway office says that buyers and sellers used to look at “comps,” or comparable homes in the same neighborhood.

“Now ‘comps’ are looked at as the competition,” Mrs. Goldman says. “Sellers need to look at other homes in the neighborhood that are on sale now or have sold in the last couple of months, not six months or a year ago. There are so many more homes on the market that sellers are really fighting against others in the area.”

Mrs. Goldman says that while last year there were only a few garage town homes on the market, buyers now have hundreds from which to choose.

“Last week I pulled up listings for a buyer and found 178 garage town homes on the market in Germantown,” says Mrs. Goldman. “A lot of buyers who look there also look in Gaithersburg, and I found another 198 on the market there.”

Mrs. Goldman says the incentives that work best for sellers are monetary. She recommends lowering the price and indicating on marketing materials that this has taken place.

Realtor Mark Griffin with RE/MAX Distinctive Realtors in Reston says his philosophy is to price a home correctly and get it in the best possible condition.

“While first-time buyers focus on closing-cost assistance, move-up buyers are looking for price reductions,” Mr. Griffin says. “Price reductions are fairly common in this market. If sellers are working with a good agent, they can watch the market and every two weeks determine what is actually selling and price the home accordingly.”

Mrs. Evers says that while price reductions are happening, she is sometimes surprised that the reductions are not deeper. She says she assumes that some sellers are opting to take their homes off the market rather than reduce the price more.

“If the price of a property started out too high, the only choice is to reduce the price,” Mrs. Evers says. “I think we are seeing more price reductions right now on listings that have been on the market since Labor Day without an offer.”

Those who want to sell before year’s end “will need to lower their prices,” she says.

“On the other hand, buyers who have been looking since Labor Day may start making offers if they want to settle before the holidays,” Mrs. Evers says.

Mrs. Goldman says price isn’t the only concern, but it figures heavily into the equation.

“Everyone just wants to know they got a good deal and were a good buyer,” she says. “Everyone is worried about the future, so they are most interested in what they are getting for their money.”

In addition to making price adjustments, Realtors suggest that offering to pay some closing costs and condominium fees can be effective marketing tools.

Mr. Griffin says that the buyers he works with are asking for at least $5,000 to $10,000 in closing-cost assistance.

“Buyers have high expectations now, and they are testing the water, asking for whatever they want to see if they can get it,” says Yolanda Muckle, a Realtor with Long & Foster Real Estate in Mitchellville.

“The buyers I work with want a lower price, and they want closing-cost assistance, too,” says Mrs. Muckle, who adds that closing-cost assistance must be in line with the price range of the home.

“At one $1,000,000 listing, the sellers are offering $25,000 in closing-cost assistance,” Mrs. Muckle says. “For homes that are priced in the $600,000s and the $700,000s, the sellers must offer some incentives. Closing-cost assistance of $5,000 means nothing in that price range, so the sellers need to offer more.”

She says one seller offered $12,000 in closing costs on a $270,000 listing, “so tons of buyers showed up. But in that case, the house didn’t show well and they wanted to sell it as-is.”

Mrs. Evers says she believes that the only thing that works for resale homes is a price reduction.

“This market is so incredibly price sensitive,” Mrs. Evers says. “Sellers can think that offering to pay some of the closing costs will help instead of a price reduction, but buyers can add, too. The only thing they focus on is price.”

Mrs. Evers says one seller recently offered to pay property taxes for the first year rather than closing costs, but this also came to about $5,000, similar to what many sellers are offering.

“I do think incentives work in the new home market because buyers anticipate incentives such as a finished basement or flooring upgrade or closing-cost assistance as part of the game plan from the beginning,” Mrs. Evers says.

“However, incentives work better in the resale market in the lower price ranges, especially for beginning buyers who are struggling to make the deal,” she says. “For this buyer, paying the first year of taxes or closing costs can make the difference between affording the house or not.”

First-time buyers are often condominium buyers who sometimes balk at paying condominium fees in addition to the mortgage payment. Mrs. Goldman recently worked with buyers unhappy about the condominium fees at their potential new home, so the sellers offered to pay the first year of condominium fees, which came to about $2,500.

The amount of fees the buyers save isn’t the only enticement.

“Offering to pay the condominium fees can work sometimes, especially because those fees are not tax deductible, unlike some other housing costs,” Mrs. Goldman says.

Mrs. Muckle says sellers are getting more and more creative, including some actually considering offering to pay the entire mortgage payment for three months or to pay six months to one year of condominium fees in addition to closing costs.

“At my listing in Mitchellville, the sellers are conveying a big-screen HDTV television to the buyers, plus a second TV, which is part of a custom-built bar,” says Mrs. Muckle.

Marianne McKittrick, a Realtor with RE/MAX Supreme Properties in Great Falls, says that some sellers are willing to offer a buy-down for buyers, allowing the buyers to pay a lower interest rate for the first year or two of their new mortgage.

“I think a lot of incentives that are gimmicky, such as throwing in a car with the house or a week’s vacation, don’t work,” Ms. McKittrick says. “People are buying a house, not a vacation. Price is key, and that’s what is so hard to determine these days.”

Ms. McKittrick says she encourages her sellers to offer to negotiate terms and conditions with buyers, such as an early occupancy or a delayed settlement.

“For out-of-town buyers, allowing them to move in early can help them settle into the new place without waiting to sell their existing home,” Ms. McKittrick says. “If the buyers sell their home sooner, settlement can take place earlier, but if not, it just has to take place by the agreed-on settlement date.”

Ms. McKittrick also says she recommends that sellers advertise all the terms and conditions upfront, including the availability of closing-cost assistance and an interest rate buy-down in order to signal buyers that the sellers are willing to negotiate.

One discouraging aspect to selling a home in the current market can be the lack of visits by buyers. Some sellers are offering increased commissions to buyers’ agents as an encouragement to those agents to bring their buyers to the property.

“Recently a high-priced home in Glendale sold after it had been on the market for six months,” Mrs. Muckle says. “The clients offered a $5,000 buyer-agent bonus on top of the commission, plus $10,000 in closing-cost assistance to the buyers. I’ve also heard of sellers offering a 4 percent buyers commission as an incentive.”

But not all agents approve of bonuses for other real estate agents.

“I personally am against offering an extra commission or bonus to other agents,” Mrs. Goldman says. “And when my sellers suggest it, I recommend that they put the money they might spend on that toward something else.”

Why? “I think it cuts down on the credibility of the agents to offer them more money,” she says. “They should be bringing the buyers to the house anyway. Whenever I have been offered a bonus I always turn it right over to the buyer I am working with rather than keep it myself.”

Mrs. Evers agrees. She says buyers don’t care about these bonuses because it doesn’t help them directly.

The consensus seems to be that the best incentives for buyers include presenting the home in pristine condition, staged to look like a model home, with a fair price and sometimes financial compensation such as closing-cost assistance or the payment of condominium fees.

Additional incentives can even be off-putting, some agents say.

“Sometimes additional incentives just add to the perception of the general softening of the market and just scare away a buyer,” Mr. Griffin says.

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