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The Big Giveaway...Does It Work?

Many sellers wonder if offering incentives really works.

I have seen incentives for Buyers, Agents and a combination of both. The reason for an incentive should be crystal clear....the seller wants to sell faster.

What works and what doesn't?

Pricing right in the beginning of your sale works best. You get more traffic and more offers at a higher price!

That being said, what about offer to pay closing costs, taxes, carpeting, painting, association fees, new cars, trips and the list is a imaginative as you can be.

This week a client asked if we offered a trip to some exotic island would that lure buyers? NOPE...they want a good deal not a trip. Now before you send me email we are not talking about the EXCEPTION....we are talking about a marketing plan poised around a give-away. Sure a few people might bite on a trip "IF" the home was the right home and they were going to buy it anyway! Wrong home...NO SALE!

What about that carpet allowance? It helps buyers if you need to update or replace your carpet...no sense in buying new carpet and having the buyers rip it out the day after close! You have wasted money...on the other hand does nasty old carpet help you get more money? NO. So if you need to update your carpet select a neutral color, not coral blue!

What about closing costs? Save your breath...if the buyer needs closing cost they are not bashful...they will ask! What about offering to pay taxes for a year? That would be nice...can you help me with closing costs too? Again it might sound nice but buyers will ask for more anyway...so save your money...it isn't going to bring you more buyer's and usually cost you more because you offered.

Ok if that doesn't entice buyers how about painting? If your home needs painting you should already have done that to get a higher price...again if it is the outside you want to have already painted...the inside, buyers willl do it themselves, in most cases. Not a big motivator to buyers...yet having a shabby outside is a big turnoff to most buyers and will fetch you lower bids or worse, NO Bids!

Association fee may bring a few buyers but what it really does is focus on the association fees, it makes buyers wonder if the fees are higher than normal.

Now that shiny new car...first of all if you are offering a car your home is priced to high....and the car isn't going to change the fact that the buyer knows it's priced to high.

How about a trip to some exotic place? Chances are the buyer won't be able to afford the plane fare and if they could they wouldn't enjoy themselves knowing they should have cashed in the trip to by carpet, paint, furniture or a yard! The truth these incentives are not going to bring you a bunch of buyers...you might have a few exceptions but the reality is buyers know what they want and the head turning incentives only cost you money.

The best is yet to come....what about offering the buyers agent more commission....use greed to have the Realtor sway buyers to your property. Here is the rub...if an agent does this and it can be proved they have broken their fiduciary responsibility to their client, the buyer. That word fiduciary is another word for legal obligation. It's not nice to break the rules an agents license could be gone for this infraction. So if the agent is doing his or her job to begin with, your home is already on the "to see" list, because it meets the buyers needs.

One last thing, what works best? Pricing Your Home RIGHT to Sell!

Hope this clears up a few misconception on incentives and what works best. Buyers buy what fits their needs...always have and always will!

Gary L White www.flexitrealty.com

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Live in the Grand Rapids or West Michigan area, not under contract? Like to sell or buy a home....give me a call. It could save you thousands in your next real estate transaction. Always confidential, Never Pressured.

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Posted by Gary White~ Grand Rapids Real Estate, FlexIt Realty, a call or click away! on 10/22/2009 05:24 PM

Comments (49)

Selling Your Home in the ActiveRain Channel

seller anxiety, seller behavior, seller agents, buyer offers, seller expectations

Originally posted at: Gary White FlexIt Realty~Real Estate & Updates, Grand Rapids & West Michigan : The Big Giveaway...Does It Work?

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49 Comments on The Big Giveaway...Does It Work?

OCT

As I say in good and bad markets marketing cannot make up for bad pricing. That is alway the most important aspect of a listing.

Gary, You are so right...price point wins every time! That is the best incentive out there! Great post!

Gary

Incentives are not as good as consumers wanting a good deal.

Gary, everything you've said is so true. Now why is it so hard to do? :)

Hi Gary, I agree. Incentives can be great but it helps more when the home is priced to sell.

~ Lana

Giving a bonus to the selling agent implies that agents select the properties they show based on commission. Not only is that not true but the homes we show are driven by the buyers. They tell us what they want to see, not the other way around.

OCT

Absolutely.... pricing is the key...and even at the right price sellers will still be asked for concessions, home warranties, repair of inspection issues, etc.

I tell the buyers about the incentive(s), and will contribute it to them at closing -- with all parties notified ahead of time, of course. It may not make the buyers' decision any different, but it does short circuit any concern about where my loyalties lie.

"This is a great time to buy a house"

Akron, Ohio

I've never understood the BTSA...if my buyer wants the house, she'll make an offer. I'll not try to sway them away from what's best for them.

Regarding the exotic vacation, I assume we're dealing with luxury homes? I would counsel my buyer, "Let them keep their $10,000 trip and we'll offer $10,000 less." (What if the sellers obtained that trip at a bargain price? Complimentary trips make me nervous anyway.)

My buyers placed an offer on a home where the incentive was to pay 3% towards your closing costs if you submitted a full-price offer. We did the math: take 3% off of the list price and offer even less than that. With that, their offer was accepted!

Gary - This is a great post. I've had sellers offer all kinds of things, but not be willing to reduce price . . .

Gary - spot on! I always tell my Seller clients that in any market, if the property is priced right, it will sell quickly and for close to asking price. There's nothing hard about it. Unfortunately, it's a matter of Seller's wanting what they want and not being realistic.

Price, Price, Price.... I agree with your post!! No gimmicks work best!!

Homes that are priced correctly sell the quickest. Good post because it is so true!

I agree with all your points. Let's stick to making the property a good buy for the buyer. If it's a good value, the other giveaways aren't needed.

Price is what gets attention. I just had someone offer golf clubs trying to out bid my buyers....really? Nice idea, but it's all about the real deal.

I'd like to put a different spin on this incentive thing. I just received two offers on a listing. One came from a buyer who is licensed...I hate to call them a real estate agent because I don't think they have ever sold anything and she did not know how to complete an offer. She is buying for herself. She told me that she did not want the commission. I told her I would need a letter from her broker waiving commission. Of course, I thought she wanted to apply the waived commission to the purchase price. She said no. That I could keep all the commission. That was to be her "incentive" to me to help her win the property. I set her straight immediately! If she wanted to apply the commission towards the purchase fine, but I would not consider accepting any part of the commission.

I don't believe in broker incentives of any kind. I prefer attractively pricing a property but I have used closing cost credits.

Rather than offering a new $30,000 car, the seller should just lower the asking price by $30,000. If it's priced right, buyers will come and make offers.

Price the home to sell. That's the bottom line. Incentives are nice, but not the first consideration.

We haven't had much luck on incentives. Our last client offered a contest for agents who showed his house a stay in a condo in Hawaii for the most showings, we only had one showing after the incentive and then sold it to someone who came to an open house.

Most incentives for the buyers agent are the first things to be removed when the seller is negotiating an offer on an over priced listing.

Mary Lou Cherry Greenville, NC

Mow your lawn, pull your weeds, trim your shrubs, prune your trees, paint your walls, clean your carpets and polish you counter tops. This can all be done in one weekend by one couple on an average 2000sf home on a 10,000sf lot. A little sweat equity and you've just saved about $3000 added thousands of dollars in value to your home. I tell my Manufactured Home clients this all the time and it works.

Fun reading about the crazy things people do, and I know sometimes that's me although not related to selling houses.

Great post! I have done just about all of the things you mentioned because of the slow market in my area. Nothing works better than what you said: price it right and get the traffic in the home. Excellent!

Houses that are priced right do not need all the added incentives -- just price right and let it sell.

I heard a new one the other day - the realtor offered a $5,000 credit to property taxes for the first 5 years. When the seller found out about this (they are near short sale status), they flipped out, fired the realtor and reported them to the Board of Real Estate Brokers and Salespersons! Creativity doesn't give a realtor the carte blanche to bind the seller, as we have learned in this situation.

Buyers and agents see right through all this sily incentive stuff if they have a pulse. Just price the house right and wait for the right buyer.

Hi Gary- Good seeing you last week at WCAR annual meeting. Sellers who want to list far above the realistic market price for their home are headed for disappointment, and may not realize that by going that route, most buyers will never even see that priced-too-high listing.

Very good points and well said, but I don't completely agree. I think it's more about using the right gimmick for the market conditions and marketing it correctly. No question it has to be priced right and definately get rid of the old carpet and put on a fresh coat of paint if it needs it...even the banks have caught on to that one (sometimes).

Having a gimmick like a trip or a car or a seller paid rate buy down will attract attention when marketed correctly. The gimmick isn't going to sell the house, but the marketing stands out and will get noticed...imho. Also, I think offering a higher buyer's agent commission is very effective in the right market. It keeps the home fresh in the mind and top of the list for buyer's agents. For example, if there are 75 available homes meeting the client's criteria it's unlikely they'll see all 75. The extra commission might be what gets the home shown on the first day out. Chances are the buyer will find the right home before seeing all 75 possibilities.

Gary,

How right you are! Condition and PRICE are today's selling gems! If the Listing is priced right, it will sell.

Kathy Opatka

Back in the days when listing agents were taking listings at ridiculous low commissions and even NO commission to the buyer's agent I found that when listing a property and offering a normal split or even a half percentage point more resulted in more showing by other agents.

To show a property where the compensation is a low dollar amount or a pathetic commission is a slap in the face by a fellow real estate agent! I often wondered how these people could really serve their clients well at that price. Of course, this always became a difficult situation when a buyer wanted to see a property that offered no commission or a short commission. Then it was time to have a heart to heart talk explaining that the buyer would have to pay the buyer's side of the commission.

Hi Tim, a pretty good slogan to sell by! Thanks for the comments.

Hi Wanda, seems pricing right is something that buyers notice. Long after the trip has been used the house payment continues. Thanks for the comments Wanda.

Hi Tom, pricing right is the only song to sing. Buyers are looking for value. Thanks for the comments.

Hello Again Lola, it does seem like a simple concept but the reality of price often escapes the wisest of seller. So many are concerned they are leaving to much on the table when pricing right. The fact that a home lingers on the market with continued taxes and maintenance issures isn't always evaluated as a true cost. Thanks for the comments Lola.

Hi Lana, incentives might turn a few heads but it won't make the final decision for the buyers to purchase. The home has to be right or they cruise on by. Thanks for the comments Lana.

Hi Barb, We have had many comment, price right and sell. Thanks for the comments Barb.

Hi Farida,I couldn't agree more...you may offer incentives but if they need closing cost help, or other contributions buyers will ask no matter what else is on the table. Thanks for your comments Farida.

Hi Thomas, it is a great time to buy especially if you want to get more home for the money. Incentives will only go so far to attract buyers...pricing right and marketing homes properly will do far more to get them sold. Thanks for the comments Thomas.

Hi Jay,vacations and the like have been tried across a wide price range of homes...with little success. Pricing the home to sell that seems to be the best option I have seen. Thanks for the comments Jay. By the way I would have counseled my client the same way. Keep the vacation and deduct it from the sell price.

Hi Lisa, it's hard for seller to pass up a home that is priced right. Thanks for the comments Lisa.

Hi Catherine, It is a simple issue but many do not understand that a home that is priced right for the market will sell very close to the asking price. The reason is based on value. Thanks for the comments Catherine.

Hi Inez, it seems we have a lot of folks that have been very successful and beat the same drum...price to sell. Thanks for your comments Inez.

Hi Ty, people need a bit of help with proper information so they can price right. You cannot do anythng about people that do not believe or heed the comparables. Thanks for the comments Ty.

Hi Colleen: nothing has buyers making offers faster or better than a property with the right price. Thanks for your comments.

Hi Karen, we all look for the same thing as buyers....value. Pricing right makes a difference in selling fast or languishing on the market. Michigan has a 15.2% unemployment rate and one of the highest in the nation of foreclosure homes. The higher price homes are struggling to sell. Thanks for the comments Karen.

Hi Sandra: It is a bit sticky when dealing with commission offers above normal to sway agents to show your property first. It might be hard to defend your reasons for showing the property if it did not meet the buyer criteria. In your case I would have had a discussion as well. Thanks for sharing Sandra.

Hi Bob, seems to be a familiar ring to your tone...price right and the offers will happen, if marketed properly. Thanks for your comments Bob.

Price is the right issue. I have made only 2.5 on many homes and only 2.0 on a few. I will say a big commission will at least get people through the door when there are a lot of homes to choose from. Does it mean the agent should only show them big commission homes? NO!

A good commission can also indicates the seller is willing to work with the buyer.

Hi Dennis, I think you said it right, incentives are nice but not the first consideration. Thanks for the comments Dennis.

Hi Kevin & Monica, your comments confirm what has been said about incentives. Thanks for adding a personal experience example.

Hi Mary Lou, so does that mean agents are getting sucked in by their own practices? :-) Actually the seller feels the agents make so much money on transactions that they can afford less to get the home sold. Little do they know our real costs. Thanks for your comments Mary Lou.

Hi John & Janis, nice linking method, your comments pretty well sum up the process. Thanks for the comments.

Hi Tina, Nice photo. We do employ a rather odd approach to selling when we lose sight of the fact that incentives cost on top of the normal concessions buyers may ask for to purchase homes. Thanks for your comments Tina.

Amen. Price it right, do the prep work and it will sell. If it doesn't sell, either it isn't priced right for the condition of the property or for the area/neighborhood. The house is only worth what the buyer is willing to pay.

Congratulations on the feature, Gary.

Gary, how topical this post is. My husband and I have one of our properties on the market that we really, really want to sell! I was wondering just yesterday if we should do one of these incentives you mention. One of the agents at the office told me in no uncertain terms that it absolutely doesn't work. That if I want to give away something, I should start with new paint and carpeting. So, the painter's in there right now, and the carpet guys coming tomorrow! Great post! Thank you so much.

Get an agent that KNOWS THE INVENTORY! Get an agent that actually works the area you are looking to purchase in. Get an agent that can price your property in front of the market and substantiate WHY their List Price will drive buyers to your property! Listen to your Agent once you have hired one. We are out here everyday WORKING it, not just thinking about it.

GREAT Post! Common sense is refreshing to read especially when written so eloquently. Well done.

Pricing your home right to sell. What a radical concept! You must be one of those "mavericks" I keep hearing about.

OCT

Gary, May I just say DITTO, DITTO, DITTO!! I often see BTSA here but rarely do I get them as I always going to get the best price for my clients. I just think pricing the home right and if it is not selling reducing the price is the best incentive!

This post was great! I do think that unusual "incentives" should be treated as a marketing gimmick because they can catch someone's eye but they won't convince someone to buy a home and they won't overcome nad paint etc.

OCT

Interesting post and comments. I haven't really thought about this issue. I deal mostly with short sales so the incentive is to buy the house and get a deal.

Very true Gary. Nothing sells a house more than correct pricing.

OCT

Great advice but I disagree on the bonus commission. If all things are equal between house A and house B and you can only show one of them, which one will it be? That's the reason for the bonus. Out of the 5 that you show, please pick me.

NOV

So very true, I've had buyers ask why doesn't the seller just lower the price insted of offing X,Y or Z?

NOV

Unfortunately, as we all know, it is just so hard for sellers to stomach the lower price their house is really at right now. They will pay anything to be able to say the house sold for XYZ eventhough they have actually netted less. Pride and ego get a lot of people in trouble.

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