Incentives for Home Buyers in Maryland

Are you ready to move on from where you are currently living in? They say that nothing good can truly last forever, and this can apply even to those who are already settled in cozy homes. There may come a time when you will have — or even prefer — to sell your home and move forward elsewhere. Although this is not a decision that anybody can ever take lightly, the same can also be said for those who are on the opposite end of the situation. Looking for and purchasing a home can be among the most important purchases that anybody will ever make. The implications for doing so are huge; there is the prospect of stability and greater control over the lives of those who are looking to buy. Due to the competitive nature of house selling, there is a need for you to provide as much incentives for home buyers as possible.

By definition, an incentive is more or less another term for perks. Some can be quite big and then there are those that are comparatively small. You may have heard about a few truly outlandish stories in your own time, like wealthy sellers that threw in a car along with the house or negotiating with a bakery to provide a year’s worth of cookies to go along with the sale. Those are the ones who tend to end up making headlines; there is no need for you to go that far. Should you have trouble in the selling of your home, there are simpler — and better proven — incentives that you can provide for those looking for a brand new place to call their own in Maryland. Below are a few things that you may want to read about some more:

Incentive for Home Buyers # 1: Interest Rate Buy-Down

Have you ever heard sellers say that they ‘pay points?’ If so, this is exactly what they are talking about. A buy-down is a mortgage financing technique where buyers do what they can to get a much lower interest rate for the first few years of their mortgage. As the seller, it is up to you to provide payments towards a mortgage lending institution, and this will domino into a much lower monthly interest rate for the buyer and a lowered monthly payment as well. The period this would affect will range from the first year all the way up to the fifth year of said mortgage.

With all of that being said, anybody can clearly see how this can be a very attractive option. Buyers will feel a lot less pressure when it comes to figuring out which day they need to lock in the interest rate, which many often cite as a very common and incredibly serious source of stress. It will also send the message that in purchasing your home, they will have beaten the market rate, which is a proud and great statement for anybody to receive. Buy-downs that are seller paid also have the added benefit of being tax deductible for the next time taxes are being filed. You may even notice some cases where the seller is not involved in the least, making this strictly between the buyers and the lenders.

For the seller, the question of whether or not this should be done is a very important question in itself. Your own answer to this may be based on how much it would cost for you to buy the rate down in the first place, as well as how long term your plan is when it comes to keeping the loan. The smart thing to do would be to find a rate sheet that can help you in making a final choice. Take note that a large number of mortgage programs are known to employ a system that allows sellers to pay specific fees in exchange for specified changes in the interest rate, which may be an incredibly enticing thought for some people. Concerning rate sheets, they may look a bit like this:

Interest Rate – Price

•         6.375 percent – 0.375
•         6.25 percent – 0
•         6.125 percent – 0.25
•         6 percent – 0.5
•         5.875 percent – 1
•         5.75 percent – 1.75

Each rate will have its own corresponding price that is displayed as a loan amount percentage. For the example written above, the expected par rate is at 6.25 percent since it possesses an associated price that is zero. Also take note that there isn’t a single specific ratio and it will also vary from bank to bank or lender to lender. It is therefore crucial to find a sweet spot where your rate buy-down is suitably justified by its cost. Keep in mind that you must first do the math and figure out the rate that makes the most sense based on your own long term plans.

Incentive for Home Buyers # 2: Closing Cost Credit

What would you say if someone told you that paying off part of a buyer’s closing cost isn’t as counterintuitive as it may initially seem. Those who look for closing cost credit tend to be first-time home buyers. Some may obtain a FHA loan or a VA loan, which are programs with generous terms that allow people with little upfront reserves to achieve their dream of finally becoming homeowners. Federal Housing Authority loans will require people to shell out a down payment of just 3.5 percent of what they would be paying for the home purchase and Veterans Affairs loans won’t even bother with any down payment in the least.

Many of these buyers may not have the cash needed to pay off closing costs, but it is worth noting how they will vary in terms of the municipality. The better-heeled buyers may also be lacking in liquidity to pay off the closing costs, especially if they have already made the usual 20 percent down payment that is required by typical mortgages. Keeping these type of buyers in mind will give you an idea on which ones are going to be interested in this particular incentive.

It may be in a seller’s interest to include the offer of paying off a certain percentage of the home’s sale price in their home listing. Considering what is now known regarding what different types of buyers may be looking into in terms of options, this would be a strong differentiator that is likely to make your home considerably more attractive compared to the other listings. Should you be going for this incentive, there are some approaches that you may want to take into consideration, such as:

• Going for a bigger purchase price: Agreeing to a higher price is perhaps the most common way buyers can get sellers to agree to paying off a closing cost credit. As an example, should a specific home be listed at a price of $300,000 and its potential buyers will have a figure of 3 percent in the closing costs. By dividing the price of sales by .97, the equal sum would be $309,278.

Buyers would then offer to pay off that amount, contingent on getting a credit that is worth around $9,278. Even with that credit being paid by the seller, they would still net the $300,000. Kindly take note that a major drawback to this approach exists in the form of the buyer’s lender potentially not appraising the home at the higher amount. Should that be the case, sellers would be stuck with a payment that does not include the perk of netting the expected amount.

• Negotiating credit through a fast close: This is yet another popular tactic that buyers can use to get sellers to pay off the closing costs, and this time, it relates to escrow, which is the tense period that is between the contract signing period and the deal’s completion. Sellers would prefer buyers who are both qualified and trustworthy enough in regards to not causing any problems during the aforementioned period. Should a buyer offer to accept the house in its present condition, then the seller may be encouraged to agree to certain credits, which is a small price to pay in exchange for any assurance that the escrow will close minus any tiresome hassles.

• Various other trade-offs: As a seller, offering credit is not always an immediate — or even an attractive — option. Buyers may ask for certain things like halving the home’s down payment or even earnest money, which leaves funds for its closing costs. Another alternative trade off would be asking for a small discount regarding the overall price, which will lead to lowered closing costs anyway. Sellers may not even want to pay off the full closing cost amount anyway, but buyers could still possibly negotiate for a smaller percentage.

Take a look at the pie chart below and see how it sums up the whole topic:

Incentive for Home Buyers # 3: Homeowners’ Association dues credit

Is your home part of a homeowners’ association that comes with monthly or annual charges? If so, then you may recall buying that home some time ago and possibly feeling quite overwhelmed with the immense number of expenses that came with it, which definitely included HOA dues. Fast forward to the present, you can now utilize those stressful HOA dues to your advantage as a seller. How can this be done, you may be asking? The answer lies in the same dread you had years before and what awaits any potential buyer of your home going forward.

If you want to stand out from all other sellers, then you have the option of offering a credit at closing which would cover your buyers’ HOA dues for a specific time period. Said time period can be up to six months, one full year, or perhaps even longer if you so desire. The best way to accomplish this would be to sit down with your agent and discuss this at length. Come up with a solution that benefits everybody and one that offers a maximum lure your potential buyers whilst not running afoul of any particular guidelines for seller credits as imposed by your buyers’ lenders.

Incentive for Home Buyers # 4: The inclusion of Window or furniture coverings

The purchasing of furniture may prove to be a hidden expense to real estate. Some owners may renovate their homes and then choose certain furniture to match the new look. In fact, there are some homes that show so well, buyers end up wanting to not only buy the house, but also all the furniture within. How’s that for a surprising and highly effective incentive? Those who have homes with special and customized furniture may want to include all that as part of the sale offer. As much as you may want to take all of that furniture with you, there is always the chance that it may not really match well with the aesthetics of your next home, so why not strive to make your potential buyers happy and entice them with it? It can serve as a win-win scenario for all involved, making everybody that much better off in the long run.

Incentive for Home Buyers # 5: Pay for appraisals and home inspections

How a home shapes up to expectations is a very important consideration for buyers. Everything may look fine on the surface, but you never know what kind of trouble you may encounter later on once the deal is completed. People need to know as much as possible what they are dealing with. To this end, offering an incentive of home appraisals and inspections can help put your buyers’ anxious minds to rest. Both serve separate yet highly related functions and offering to pay for both is a great way to pique the interest of potential buyers.

Regarding home inspections, the reasons for doing so are quite easy to comprehend. Any house you encounter is bound to have some issue that needs to be resolved. Home owners who do not pay close attention to said issues may find themselves blindsided one day and become suddenly forced into dealing with something terrible. By having the property properly inspected, buyers will be made aware from day one about all the problems that the house comes with. From there, they can make the decision of whether the home is worth it or not. Having a home inspected isn’t just an attractive incentive, it is also an act of responsibility on the part of the seller.

Examples of common problems would be leaky faucets and ripped carpets. Those things are fairly minor and often prove to be nothing more than an annoyance that pops up from time to time. Things to really look out for would be roofing or plumbing issues. Anything that hampers the safety of a home’s inhabitants will also greatly lower the value of the property itself. Speaking of value, this is the part where home appraisals come in.

An appraisal is considered a very vital component of any mortgage lending process, yet it can be endlessly confusing to many home buyers. Questions will be raised, such as ‘is the home’s value truly what is agreed upon between the seller and the buyer?’ and ‘Is it really the tax assessment value, or perhaps it is the price that the home was last sold for?’ Those can only be answered by the unbiased reporting buyers get from appraisals, especially when they are conducted by trained and licensed professionals. The differences between home inspections and appraisers can be quite numerous as well. These would include:

• Inspectors tend to provide buyers with repair cost estimates concerning any known damages or issues that can influence the negotiation of home purchase prices. Appraisers are not known to do this sort of thing.
• What appraisers are, in fact, known for would be checking of prices in various and recent comparable house sales within the same area.
• Inspectors will provide both buyers and lenders with reports that detail all their findings and any repair recommendations, which does not fall into an appraiser’s job duties or responsibilities.
• What does fall into the duties and responsibilities of appraisers would be providing buyers, sellers, and the lenders with reports that will detail how much calculated value the home in question truly and fairly has.

For home sellers, it must be noted that it is the lender that typically arrange for appraisals and it is typical for the buyer to be the one responsible for all the costs. However, if you are to utilize this as an incentive, you may want to know that appraisal fees tend to fall between a range of $450 to $750. The specific costs will depend on where your property is located and how big or small it is.

When it comes to the factors that will ultimately determine your home’s value, the following are particularly notable:

• Any known damage done to the home by termite, water, or mold.
• Whether the furnace remains in particularly good shape or not.
• Whether the plumbing is known to leak or not.
• If the home will require any major restructuring or replacing, like with some houses with roofing issues.

The final step that will be taken will be the issuing of a final report. Both sellers and buyers will want to know things such as the actual and overall size and condition of the home to be sold; comments regarding serious structural problems; permanent fixtures which will include ceiling fans, lights, and plumbing; any renovation details; lastly, there are the comments regarding the home’s surrounding areas, which will include both positive and negative features.

Incentive for Home Buyers # 6: Broker incentives

Lastly, there is the option to go for broker incentives. There are going to be a few savvy home sellers out there that will opt to take a much different route than others, a route that will involve offering to pay for a bonus percentage point. What makes this well and truly different is the fact that the payments are not for the direct benefit of the buyer, but to the agent or broker. This will go on top of all the commission that they will receive anyway. Such an option makes a lot of sense when you take into consideration the fact that the vast majority of buyers these days are already being represented by agents and brokers. By going for this option, you can cut through as many unnecessary and tedious steps as you possibly can.

The offering of a broker’s incentive is both a quick and an easy way to ensure that your home will stand out among all other listings, at least to the agents and brokers whose job it is to place property tours together. Technically speaking, this is not really even an incentive for buyers, but it does more or less the same job of boosting the potential number of buyers who are bound to take a look at what you have to offer. In turn, this will boost the chances of your home getting an enticing offer.

In conclusion, there are multiple and feasible options for you to undertake as a seller if you are truly serious about offering incentives to potential home buyers. There is clear merit in each one and what is left for you to do is just decide on what move you will make next. Before you make a decision, take note of your current assets and what it is you can realistically offer. Keep that in mind as you also take into consideration all of your long term plans. For some people, it may be worth going after just a single of these incentive options, or perhaps it can work best to mix two, three, or even more together. Do not be afraid to experiment; after all, the success of selling your home may depend on what you ultimately choose to do.