Sometimes ideas are so old that they are new again.
During the first Bush administration (with VP Dan Quayle), my real estate sales manager bought everyone tickets to see real estate guru Jeff Elias discuss real estate financing, and, how to make deals come together. Elias was a smooth talking Texan who had solutions to why people weren’t buying homes during that recession.
The solution: agents need to understanding creative financing.
Jeff’s approach addressed a key issue that most buyers were having at the time, which also is a key problem that home buyers face today. To summarize, real estate is expensive to buy and mortgage payments need to be manageable to get buyers to buy.
Understand the home buyer’s point of view
I still have Jeff’s book for some reason, and his examples include amortization schedules that would make a novice laugh. The interest rates used are never lower than 7%.
There is a chapter on 2-1 buydowns. The concept is to have the seller pay an additional point or two for the purchaser to reduce the interest rate over a two year period. A “point” is equal to 1% of the loan amount. It was a solid strategy that helped get many homes sold.
Today’s home buyers are having similar issues when deciding to buy a home. For example, down payments are up and additional loan and typical closing costs are high too.
Many home sellers today are facing soft markets where inventories have increased.
Provide the home buyer with some cash
So, here is the new idea…
If you are a home seller, offer an incentive to prospective buyers.
Address the number one issue for 80% of home buyers: lack of cash.
Now, two weeks ago an agent friend gave me a call and the discussion migrated to his two unsold listings. Both were well priced and in good condition. Should he suggest dropping the price… again? The big problem was that there were now many more competitive homes on the market and showings were becoming less frequent. Days on Market were adding up!
He was feeling ineffective and was searching for a way to sell his client’s house. So, I recommended adding “Seller will pay a $5,000 closing cost credit with lender approval” to the Internet or public remarks.
Fast forward a week… my phone rings and it is the agent. “Doug, you are a genius! We’ve got a contract!”
Here is the thing home sellers who have had your home on the market for a few months, start to explore ways to set yourself apart. New home builders have always enticed home buyers with special financing and closing cost credits.
If your home has been on the market for a few months, then it is time to try this strategy.