I agree, what do we do when faced with new construction incentives!?!?   We (agents and seller) just simply cannot compete.  I can't afford to pay the buyer's agent 4%, my seller can't offer free granite, or a fully professionaly decorated and furnished property. (THIS ACTUALLY IS HAPPENING IN A DEVELOPMENT I HAVE AN EXISTING LISTING IN--SELLER OFFERING A 2300+SQFT TOWNHOME COMPLETELY FURNISHED FOR $20K LESS THAN MINE!!) No contest! We won't sell, or even have showings until these are gone.

I have a seller that wanted to offer money toward closing costs to spur interest.  Once I explained that typcial closing costs are 3% of sale price, he didn't want to offer that much.  Since (as you mentioned) at the end of the day, the net to seller is what it is--however it is arrived --at I suggested taking the price reduction over incentives.  

You can offer the incentives, and still get the  extreme low ball offers and the seller is looking at an even less net proceed.  

I think the best marketing strategy in this market is PRICE PRICE PRICE!   The market is showing us that it will not bear the prices we have established by the number of price reductions, cancellations, expirations, etc etc.  If we could somehow find a way to get these properties priced for the current conditions I think that we could easier negotiate the front page price on the PA to be inflated and have our sellers pay those closing costs, with the net to them not being quite as harsh a blow.

Unfortunately I am not so convincing to my sellers who are still living in 2004 market conditions.

So to wrap up my rant...I am a firm believer in price reductions over incentives-or better yet convincing the sellers to start out at the right price.  If the potential buyers have a range they are searching in, they won't even see the incentives offered if the price is out of their price range.

What about proper pricing against the product that is being delivered?  By that I mean, what is the quality, the flow, the passion in the design - yes, passion.  The consumer feels all of this when they walk into new construction.  

When several developments are giving incentives to the buyer we are actually spoiling the buyer and like a child when given too many toys, they get confused, bored and don't know what to play with because of the options.  Are we reducing the value of new construction by giving incentives?  Are we actually masking a problem with the incentive(s) or promoting agents by giving them bonus' to "sway" the buyer our way?  Isn't that an ethics violation?  

As Realtors, instead of incentives and bonus' - get the developer a stager for one or two of the hardest selling units.  That's right.  Not the ones that will sell over night but the harder selling units.  The majority of the consumers don't understand the potential in their unit without someone showing them.  

As Realtors, we are to guide the developers and help them to create a good flow in floor plan, an awesome utility that is functional, solid products.  

I started to save homes in Chicago and rehab them because I was tired of the junk that I was showing.  I have raised the bar whereby the consumers appreciate well thought out floor plans, photos of the progress of the development, quality materials and creating a design that fits the needs of the consumer and not the ego of the developer.  

As Realtors, I do not think we are as upfront with developers, builders or sellers when it comes to pricing their home to sell.  We need to give them the options with the pricing that results when those options are implemented.  

If the developer doesn't make out as well on this development - he will do better on the next one because he has a great Realtor helping him with the floor plan design.  

It's about building a solid reputation as a good honest and fair Realtor and the rest follows.

I vote NO for incentives and bonus'.  

I agree.  I strongly believe Buyers are more concerned with the price tag than they are with incentives.  Incentives are used to draw them into the property, but bottom line....it's all about MONEY for both parties.

We have several realtors in the area offering cruises to the Buyer's agent, bonus commission for getting in contract by a certain date, and even gas money to Buyers agents for showing the list agents home.  Granted these incentives are directed to the Buyer's Agents, but similar incentives are being offered to the Buyers as well.

We're in the business of marketing and selling homes...not marketing prizes and contests.

By the way...does anyone in your area use VR (Value Range) Pricing?  This is where a home is advertised using a range of amounts...something like this....

"offers accepted between $150,000 and $190,000."

I understand the reason behind this VR pricing, but why wouldn't you just list it at a lower price instead of offering such a wide gap?  Does this confuse buyers and agents?  I'd love to hear more from those using this VR pricing model.

Most buyers we work with get pre-qualified/approved by a mortgage lender within their arnge of affordability and then select a neighborhood(s) or area(s) where they would prefer to live. Seldom have I ever seen a buyer deviate from this because some agent or builder is willing to pay moving costs, legal costs, or their mortgage payments or utility costs for a year. We've also seen agents advertise they will give the buyer as many as five free (?) appliances, home theatres, and trips to sun destinations.

A few things we all need to acknowledge here.

Firstly, there is no such thing as free. Most all incentives are usually followed by the phrase "Certain Conditions Apply." In Canada right now, the standards of business practice of the Canadian Real Estate Association requires agents making these offers to provide details up front in their ads or, at the very least, a phone number or web address where the details can be communicated. Failure to do so may result in charges of false or misleading advertising under federal legislation.

Secondly, like the opening line of my comments, price and location is everything. Sure other things are important but those two are the prerequisites of most home searches. When you start seeing incentives flood your market, it's a sure indicator that the market is slowing and, as a professional, it's important to maintain frank and open communication to your clients in that regard. By showing them sales to list statistics, sales price percentage of list price, and days on market numbers, you can demonstrate to your vendors that pricing "right" will yield far greater results than incentives or gimmicks.

Lastly, we are in a referral business. Most established Realtors can review their production reports and confirm in excess of 85% of their business comes from referral sources. Why throw away hard earned money on incentives and gimmicks to lure buyers? Price the lsitings "right" (reflective of market) and they will come!!

Good Selling To All!!

I have realized that the old real estate saying "Location, Location, Location" is out of date.  The new real estate saying, at least in my market, for Buyers and Sellers is "What's In It For Me."

The bottom line seems to mean more than the location these days.

If incentives ad to the bottom line, they sometimes work.  If they are merely cosmetic, they confuse buyers.

Yes many builder/developers are giving incentives, but to say it is a gimmick. I have to say thats not fair! I do work with new construction and resident. resale both. Here in Michigan, builders are needing to move inventory just to stop some of the bleeding. I have seen many of times builders bringing money to the table and myself being in SHOCK! The market has changed for everyone, now more than ever builders/developers need to have builder/broker relationships.

If your in an area that has a lot of new const. (which I am) You have to share with your sellers what the comps are...and make sure their home is priced right and just as welcoming as any model.

I would think the seller has to price competitively whether you are offering to help with buyer closing costs or gimmicks, but get real, would you really want a flat screen tv for buying the house or just pay $3000 less? Take the tv and you'll be paying mortgage interest on it for 30 years because it's built into the price.

As to the agent incentives, when the builders get wild and offer 6% to drag your buyer in, how do you think your client will feel about you at closing when you walk out with a large check?

But doesn't the seller pay the commission you say? NO. If the buyer doesn't buy, there is no money for the seller to pay the commission so whether you want to believe it or not, all commissions are actually being paid by the buyer.

Finally, as to convincing the builder to offer value rather than cut prices, these are large corporations that are scrambling to turn a profit in the current downturn. They are firing their agent representatives who couldn't sell the same number of homes in 06 that they did in the previous few years and are replacing them with fresh blood. I doubt they are open to comments from a real estate agent to increase the value of the houses they are selling and everything will be just fine.

Some good points here...

Good points all, but here's one that can put a crimp in an incentive plan.

Here in good 'ol Kentucky, and lots of other markets, these incentives and/or bonuses to agents must be disclosed.