October 8th, 2014 7:47 AM by Jackie A. Graves, President
It is easy to be drawn in when a builder or seller
offers assistance—or a fun incentive—to purchase their property. When you’re
deciding on your down payment and
estimating your monthly payments, any help is welcome.
However, while financial assistance, a free vacation, a sunroom
addition, or a new car are enticing reasons to consider one property over
another, buyers must keep a long-term focus in mind and a skeptical
eye on these kinds of builder incentives and seller concessions.
Buying a home is more than a financial investment; there’s also an emotional
component. Builder incentives and seller concessions are sales
tactics to encourage you to make an offer on a home.
If you truly want a property for other reasons aside from the incentives
and concessions, it may make sense to make a serious
However, if you’re more interested in just taking advantage of a
seemingly cool deal, then you need to keep looking for a home you
truly love and dig deeper into the details of the deal.
Why are incentives offered?
Builders of new homes offer incentives to buyers at various times during
the development cycle.
In the initial stages of selling a new community, builders often offer
incentives to pre-sell homes. When a community is almost sold out, builders may
provide incentives in order to sell their final few homes.
Sellers of existing homes may offer concessions to buyers, particularly
if they’re trying to sell an unusual home or
if market conditions favor buyers.
If you’re looking for a home in a seller’s market and are offered a
concession or incentive by a seller, take it as a red flag and
ask why the seller is so eager to offer a deal.
Common builder incentives and seller
Builders often offer to pay closing costs or
for optional features such as a finished basement, a sunroom addition, or
stainless steel appliances.
To get the incentives offered, buyers usually must work with the lender
recommended by the builder as well as the title company chosen
by the builder. If you choose to work with the builder’s preferred service
providers, you still should shop around for a loan and compare title company
fees to be sure your deals are fair.
Some sellers may stoke interest with offers of a free vacation or car.
Keep in mind you may have to pay taxes on these items—and you’ll be responsible
for insuring a car, too.
Sellers also can offer to pay closing costs, buy down your
interest rate, or pay homeowner or
condominium association dues for a few months. Remember to
evaluate whether the price of the home has been increased to offset these
Remember, a good REALTOR® can
help you analyze the true market value of a property and any concessions.
Your lender still needs to know
Loan programs have rules about how much a seller can contribute towards
a buyer’s purchase. If you’re considering a deal in which the seller or builder
will pay some of your closing costs, you must discuss this with a trusted
When you work with experienced and responsible professionals, you can
feel confident any incentive you accept is just a bonus on top of your decision
to buy a home you can comfortably afford and love.
By: Michele Lerner | Updated from an earlier version on realtor.com®.
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