Homebuyers: Grab your incentives while they’re hot
By Melissa Wirkus
If you are one of the seemingly few individuals looking
to buy
a home right now, then you have probably heard about
the tantalizing incentives being offered by just about
every type of home-seller out there.
Everyone from giant mega-corporate home
building companies to your hippie next door neighbors
are trying to come up with interesting incentives to
lure-in buyers and close a deal in the slowing market.
With all of the incentives floating around, from big
screen TVs, to help with financing to a vacation to
Aruba; many people may be wondering how to get the most
bang for their buck.
Well, Jean Chatzky, the editor-at-large for Money Magazine,
gives some practical advice in her October 23, 2006
article, “Builders to buyers: Take this house,
please!”
“Home inventories have gone skyward in the past
year. In August (the most recent month for which data
are available) there were 4 million homes on the market
in the United States, a million more than at the same
point in 2005. Combine that with the boost in interest
rates and you have a lot of nervous sellers.”
“‘Until now sellers didn't want to cut their
prices. They were much more willing to provide an incentive
- refinish the deck, seal the driveway, help with the
financing,
anything but cut the price,’ says Mark Zandi,
chief economist of Moody’s Economy.com. That's
because incentives are cheaper for the seller in most
cases.”
Now, analysts are saying that times are getting so tough
in some markets that some sellers are willing to lower
both the price and offer incentives. Things are really
looking good for all of you buyers out there, now you
just have to know how to use the market’s situation
to your benefit.
The first thing is to know that you have some negotiating
power in the home buying transaction, so use it
to your advantage.
“Let your eyes - and the inspector you hire to
check the place out - guide your requests. If the house
needs painting, new windows or a fresh buffer of trees,
now's the time to ask. And ask for a price cut to boot.
Builders and developers use incentives first for a different
reason: Reducing the price on one house in a neighborhood
could hurt the prices of the remaining homes (and it
peeves buyers who already paid full price).”
There is also a growing trend in offering incentives
that help a buyer out with their mortgage, which is
extremely helpful considering that it is more financially
difficult than ever to get into a new home.
“Buyers are also getting incentives for taking
out mortgages,
says Anthony Hsieh, president of LendingTree.com. For
example, 20% of home builders are using ‘buy-down’
programs, in which they buy down your mortgage by two
percentage points in year one and one point in year
two.”
“That can, in fact, be a great deal. But tread
carefully. Some other trendy mortgage offers are a little
too much like credit cards with teaser rates attached.
They're cheaper in the early years than what you might
qualify for, but they escalate quickly.”
The bottom line is to look at all of your options, and
hunt around for a house that truly meets both your financial
and personal needs; not one that offers the best incentive
(although who could refuse a weekend getaway to the
Caribbean?).
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