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This post was updated Dec. 5, 2024.
High interest rates continue to be a barrier for both buyers and sellers alike. Buyers, unable to qualify for homes that meet their criteria, are waiting on the sidelines hoping rates will lower enough to make a purchase viable. Sellers, locked in with sub-four-point mortgages, cannot imagine selling and repurchasing at today’s higher rates.
As a result, a figurative cork in the bottle has slowed the market to a trickle. Throw in abundant confusion surrounding the new commission rules along with normal seasonal slowing, and both buyers and sellers are looking for ways to facilitate purchases.
The reality is that there are things sellers can do in the current market to incentivize buyers. At the fore are the ever-increasing fees a buyer must pay to consummate a sale — especially now that buyers are responsible for their agent’s compensation. As a result, some buyers simply do not have the extra cash required to close the deal. Sellers can help alleviate the pain; here are 16 ways homeowners can facilitate a sale.
1. Inspections
Historically, buyers have paid for inspections, with costs easily exceeding $1,000. Depending on the home and geographical location, inspections could include property (all the major systems of a home), wood-destroying pests, roof, pool and spa, foundation and/or soils, chimneys, wells, radon, mold, asbestos, lead-based paint, sewer laterals, septic systems and more. Depending on the property and regional practices, the numbers can soar.
Recently, however, some sellers looking to maximize their home’s value and set the stage for potential non-contingent offers have begun preemptively providing reports. As long as the inspections were done recently by recognized, competent inspectors, these reports can usually be accepted, potentially saving a buyer a significant amount of money.
2. Closing costs
In a hot market, sellers typically have a “take-it-or-leave-it” attitude. As markets slow, however, sellers become more willing to provide enhancements to incentivize buyers, including credits toward closing costs. These credits, based on a percentage of the purchase price, are especially useful for those with limited funds and government-assisted low downpayment loan programs.
3. Mortgage rate buydowns
Even with the recent rate reduction, some buyers are still struggling to qualify. Sellers can ease the pain by helping buyers “buy down” their mortgage rate, thus reducing their monthly payments and easing qualification limits.
4. Additional lending incentives
In addition to buying closing costs credits and rate buydowns, a seller could also offer to cover a buyer’s PMI (private mortgage insurance) for a predetermined period of time or cover the first X number of mortgage payments to provide some breathing room after the purchase.
5. Home warranties
Although practices differ regionally, in some parts of the country, sellers customarily provide buyers with a one-year home warranty. This not only saves buyers money; it also provides peace of mind for the first year of ownership. As the costs of labor, materials and insurance programs move upward, home warranty prices have also significantly increased, making it more difficult for a buyer to justify the expense if left to go it on their own.
6. Repairs
Inspections frequently reveal issues that could be costly for buyers to remedy. Sellers can help by responding positively to buyer requests for repairs. Repairs can range from small, low-cost items to significant issues, such as costly dry rot and termite-related damage, foundation issues, faulty plumbing and electrical systems, failing roofs — the list is endless.
While some buyers may prefer a credit to actual repairs, keep in mind that credits cannot exceed a set percentage of the purchase price, and any credit provided can only be utilized to cover actual closing costs. If an agreed-upon credit exceeds the actual costs, then that extra money is left on the table. If a buyer’s closing costs are utilizing all of the funds being provided in a credit from the seller, then actual repairs by the seller prior to close may be the way to go.
7. Leased items
While items such as solar panels can be leased, consequently lowering the initial costs of obtaining the system, those monthly lease payments can provide a barrier to buyers already stretched to their limits.
When purchasing a home with leased equipment, in addition to qualifying for the mortgage, buyers must additionally qualify with the leasing company. These extra monthly payments increase their debt ratio and may disqualify some buyers. Sellers can alleviate this by paying off leases with sale proceeds at the close of escrow.
8. Appliances
Sellers willing to leave refrigerators, washers and dryers and other “optional” appliances can help buyers ease the initial move-in costs.
9. Prepaying fees
- HOA fees: While a common practice with many new construction homes, this can also be utilized with resale properties. In states like California, rampant increases in insurance, labor and building material costs have pushed many monthly HOA fees into the stratosphere. Additionally, recent state legislation in California requiring inspections of balconies has added an entirely new level of expense, resulting in many HOAs imposing significant assessments. Sellers can offer to pre-pay a set amount of HOA fees and also pay any impending assessments out of the sale proceeds at close of escrow.
- Property taxes: Prepaying a specific amount of property taxes for a buyer might be a real incentive.
10. Upgrades
I often hear sellers say, “We don’t want to do any upgrades since buyers will probably rip it out anyway.” While these types of comments reflect a misunderstanding of the reasons it can be good to install upgrades such as flooring, some sellers will want to issue a credit instead. I have frequently seen, “Sellers to provide a credit of $xx toward new flooring.”
Although this is well-intentioned, it can raise problems, especially if a buyer is maxing out closing costs credits simply to get the home.
Additionally, any credits toward upgrades cannot be given to a buyer for that purpose. All credits can only go toward actual closing costs, and if the amount of the credit exceeds the actual costs to close, that leftover money cannot be given to the buyer.
For this reason, it can make more sense for a seller to advertise that they will provide certain upgrades based on suitable offers and then, once contingencies have been removed and prior to the close, install advertised upgrades in concert with the new buyer’s preferences.
If the home being purchased is new construction, upgrades can frequently be negotiated as part of the purchase.
11. Rideshare incentives
Buyers of homes in metropolitan locations that have either limited parking or no garage often have no personal vehicle. In these cases, a rideshare incentive such as pre-paid Uber or Lyft for a year or credits toward car share programs such as Zipcar, Sixt and others can help seal the deal.
12. Seller leaving furnishings
When we bought a property intended for use as a luxury vacation rental, we were facing the additional costs of fully furnishing the home. We were pleasantly surprised when the seller, who had used the home as their personal vacation home, offered to throw in all the upscale furnishings for a ridiculously low amount. Needless to say, we jumped on the opportunity.
We have often had buyers ask if they could purchase the staging or specific items belonging to the sellers. Sellers can advertise that they would be willing to include certain or all furnishings to sweeten the deal.
13. Moving assistance
While some buyers can move themselves easily enough, others will be looking to hire a moving company. A seller could easily offer to cover moving expenses up to a certain amount.
14. Credit for expedited closing
Cash deals and even some lenders can close quite quickly. Providing a closing bonus if the deal closes within a certain number of days might be an incentive for some motivated buyers.
15. Unique concessions
We have seen some sellers offering a one-week vacation package at their timeshare resort. Others have leveraged their profession to provide business or service discounts or credits toward any number of items, including season tickets to local sports teams, a year’s membership at a country club or health facility, a subscription to a dinner meal plan such as Home Chef — the list is endless. The advantage of these concessions is that they are not tracked through escrow and do not interfere with other normal credits.
16. Concessions to the buyer’s agent
As buyers are beginning to grapple with the fact that they are now responsible for their agent’s compensation, sellers are being confronted with the reality that offers can now include requests for a concession with which the buyer can pay their agent. Sellers receiving such requests can then decide if they are willing to cooperate, thus incentivizing the buyer to complete the purchase.
As we head into the winter and rates continue to be higher than many buyers seem willing to accept, providing one or more of the incentives above may be the ticket to getting your home sold this year, rather than languishing through the holiday season like last year’s Christmas fruit cake.
Carl Medford is the CEO of The Medford Team.
