Source: Associated Press/AP Online
Publication date: 2006-09-19
By RACHEL BECKNEW YORK – Not so long ago, home sellers used aggressive tactics to squeeze every last bit of profit from their home sales. Now that home sales are weakening, buyers have taken a page from the sellers’ playbook, demanding everything from new appliances to no closing costs to upfront cash to get the deal done.
In some cases, what they are doing is down and dirty – sellers have been asked to pay off buyer’s credit-card debt, cover costs of the buyer’s current home or even pay for the buyer’s commuting costs from the new home.
This kind of gamesmanship allows buyers to get the most for their money. It also reveals that the housing market’s ugly side may be here to stay.
The residential real estate market is cooling from its record-setting pace. New home sales are projected to fall about 16 percent in 2006, and existing home sales are forecast to dip 7.6 percent, according to the National Association of Realtors. Growth in home prices is expected to be minimal, coming in at less than 3 percent in 2006 and 2007.
Homebuilders are certainly feeling the pinch. KB Home, for instance, has started selling off land in its portfolio and said that preliminary net orders for the third quarter were down 43 percent from the prior year, as cancellation rates have shot higher. Gross unit orders and traffic to new home communities each slid 11 percent in the third quarter.
What a change from the not-so-distant past when homeowners controlled the game. Chipped paint? Who cared? No landscaping, no problem. Old, dirty carpets didn’t turn people away. Some sellers even got standard points in contracts tossed out, such as home inspections and financing clauses that tended to protect buyers.
Those days are long gone. Sellers aren’t just lowering prices now. They’re also offering many extras to entice buyers.
Through the end of this month, Pulte Homes’ 17 San Francisco locations are giving away a weekly vacation for two at destinations including Hawaii and New York as well as incentives worth up to $99,000, including everything from pool installation to lower interest rates. In Rockville, Md., Mid-Atlantic Builders is offering a price-guarantee program, which gives the buyer a price-break should the value of their home fall before closing.
Real estate agent Mark Goldberg in suburban Washington turned into a general contractor for the last four homes he listed, doing everything from painting to landscaping to installing new lights. One of his clients just dumped $25,000 into a house they are selling for $400,000 that isn’t even their primary home but a rental property that they are now trying to sell.
“Sellers have to spend money to bring their properties up to snuff. They have to give buyers a reason to be interested, or else they will walk away,” said Goldberg, who works at Long & Foster realtors in Bethesda, Md.
Even the president of the National Association of Realtors, Thomas Stevens, finds this market a tough sell. His Great Falls, Va., home has been listed for a year, but had no takers yet for its $1.45 million asking price – which his realtor has long said was too high. He now plans to talk to his agent about what price can get the deal done.
Still, that might not be enough to close the sale. Buyers want more – and are coming up with their own must-have lists.
That’s what Kelly Holdcraft has discovered as she tries to sell her two-year-old custom built home in DeWitt, Mich., which has been on the market for six months. Not only has she had to lower the price by $36,000 from the original listing of $435,000 – which takes her below the $425,000 she paid to build it – but her latest offer was a rent-to-own proposal that she found outrageous.
The bid came in at $365,000, but the prospective buyers were having problems with their credit so they wanted Holdcraft to rent them the home for one year with the option to buy at the end of that if their credit cleared up. Their rent offer was $300 below Holdcraft’s current mortgage payment, so she quickly declined.
Other tales abound: Buyers throw out new demands right before they sign the deal, such as to have their credit-card debt paid off, their closing costs covered or the homes completely repainted with their choice of colors.
The buyers of Theresa Liddy Dolge’s Hamilton, N.J., home wanted to her to pay their apartment lease from June through August since they forgot to tell their landlord they were moving. She didn’t agree to that, despite her lawyer and realtor’s attempts to get her to do so. They also asked for her train pass and her parking spot at the train station – both of which she no longer had.
Granted, she made money on the deal – selling the home for $275,000, which was well above the $160,000 for which she had bought it. But the buyers’ sense of entitlement still bothered her.
That trait is something that today’s buyers seemed to have learned from yesterday’s sellers. When low mortgage rates and relaxed lending standards allowed buyers to easily secure generous financing in recent years, homeowners saw that as an opportunity to inflate their selling prices.
Now buyers are watching mortgage rates move up and risky loans implode. They want to make sure they get as much as they can out of the housing market. That certainly sounds familiar.
Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck(at)ap.org
|Drew de la Houssaye is an associate with THE BROKERAGE Real Estate Group Beverly Hills. Drew specializes in westside luxury real estate, renovations and probate sales. He blogs on Westside real estate, entertainment and local events. If you would like to contact him, he can be reached via twitter, facebook, LinkedIn or email.|
Drew de la Houssaye
(310) 903-7866 ph
(310) 300-0635 fx
6117 Reseda Boulevard, #200 Tarzana, CA 91335