Sellers Increase Incentives to Mortgage Applicants Across the Nation
Are you a Los Angeles Lakers fan?
Buy a house in the Rancho Cucamonga, California housing market listed for $925,000 and the seller will toss in four sixth-row tickets facing the Lakers bench, along with VIP parking.
Sellers are getting more creative, aggressive, and sometimes desperate with incentives to lure buyers to a massive supply of unsold homes in a bleak housing market.
“She’ll give four tickets and you’d be sitting near the Denzel Washingtons and Dyan Cannons and Jack Nicholsons of the world,” said Garey Teeters, owner of the listing agency for the Rancho Cucamonga house, Coldwell Banker Kivett-Teeters Associates in Yucaipa, Calif.
The stakes are higher, and upgrades to granite countertops or premium appliances that once did the trick are not enough.
“We’re trying to make a property more interesting and perhaps, like with Lakers tickets, make it more fun,” said Teeters. “Buying a house is a balance between emotion and business sense.”
Despite price cuts in some regions, homes remain unaffordable for many after a record five-year surge. The bad credit mortgage loan crisis also makes it harder for borrowers with sketchy credit to get loans from pickier lenders.
As the buyer pool shrinks and the supply of homes for sale swells, real estate agents, lenders, and builders clamor for business. And the sweeteners are getting sweeter.
“I’ve got one house that includes a Harley-Davidson and I’ve got things like a year’s pool service, association dues for a year,” said Teeters.
One listing for a house priced around $475,000 includes a trip for two to Rome for seven days, airfare, and a stay at the airport Hilton in Rome.
Meanwhile, payments will jump up to $1 trillion on adjustable-rate home loans this year, while late payments and foreclosures are mounting.
Builders are reporting slow sales for the spring season, when warming weather usually spurs home shopping. More applications are being turned down by mortgage lenders or canceled by customers.
“They are using everything in their arsenal” to pull in buyers, said Steve Melman, economic services director at the National Association of Home Builders, in Washington, D.C.
The housing market cannot rebound until the overhang of unsold homes is pared, economists say. When prices slide, sellers of existing homes often take their houses off the market unless they need to move.
Nearly 60 percent of builders add options without extra charge to attract customers, up from about 37 percent in September 2005, said the NAHB’s Melman. “The builder’s glad to sell and the buyer’s happy with the increased value and more likely to come back to that builder, say five, six years from now when they want to trade up.”
Still, if incentives worked perfectly, there would be fewer homes failing to find mortgage loan borrowers. “They’re working,” Melman said of incentives, “but because more people are doing it, they stand out less.”
Eric Weinstein, chief executive of Carteret Mortgage, in Centreville, Va., says sellers are getting desperate. “The new thing is they give a free basement. The builders are definitely giving tremendous concessions right now, and of course, the sellers are too.”
A full page ad in a New York newspaper features a shark clenching a house in its jaw. “Save your house, save your money, call Refinance.com today,” the ad says. “Regardless of your credit history, we can help you.”
“For the first time in our history we’re actually advertising,” said Weinstein. “It was mainly word of mouth and realtor referrals before. You’ve just got to find another way to generate business.”
Unfortunately, the new come-ons are costly and may not be enough to sell homes, regardless of their appeal. A “free” pool can cost tens of thousands of dollars, hurting builder profits.
Borrowers who get a one-year pass on payments will find those costs rolled into the mortgage, and sellers might have to raise the agent’s commission. More house price cuts are likely unless supply shrinks.
“Two words real estate people fear the most are ‘jobless recovery’ ” said Chuck Dannis, the president of real estate firm Crosson Dannis Inc. in Dallas.
SOURCE: Boston.com