While The Portsmouth Herald hails from Maine, their analysis of the market moving from seller to buyer is good and applies very well to what we are experiencing in Michigan. As well, for those of you considering selling property this year, they offer great advice on how to incentivize potential buyers.
Force the Competition to “Sell” Your Home
By offering the buyer an incentive (covering their closing costs or assisting with decorating costs) you can often force competing homes to “sell” your home. As an example, consider a couple that has decided to purchase in your neighborhood. They have decided on your floorplan style and at the price range that you are currently listed. Great! Sounds like a slam dunk until we learn that there are 3 similar homes in the neighborhood, at the same price point. If all else is equal, the buyers could decide to start negotiations on one of the homes, using the others as leverage for a better price.
Let’s change the example a little bit. All 4 homes (yours included) are priced similarly. The difference in the marketing strategy that you’ve employed is that you are advertising that you will give concessions to the buyer up to 3% of the purchase price. On a home that is listed at $200,000, that equates to $6,000. These concessions can be used for a number of real estate transaction related items including:
- Discount Points – As mortgage interest rates appear to be set to increase, this can be a way of reducing the buyer’s monthly payment
- Decorating Allowance – Maybe that burgundy carpet in the den is just not what the buyer had envisioned for their next home
- Closing Costs – Costs incurred in the course of a real estate transaction include lender fees, title insurance, appraisal fee, etc.
By marketing at the same price point as your competition, but with 3% back at closing, you are forcing buyers to compare similarly priced homes to your home. All else equal, those other homes do not appear to be as attractive as your home. This is how to force the competition to “sell” your home.