From the NY Times:
A PERSISTENT recession in house sales has led to a surge in “concessions” for buyers. In listings and brochures, and most recently through a program started up on Zillow.com, real estate agents are trumpeting the news: even sellers who have reduced asking prices by a lot are often willing to do more.
That means contract concessions, in which sellers may agree to cover a buyer’s closing costs, provide a gift card for a certain amount, pay in advance for renovations, or even subsidize taxes by allocating funds from their proceeds at closing.
As long as concessions are written into a contract, and are also explicit in the Housing and Urban Development settlement document (a form used in closings), many banks in New Jersey are approving mortgage loans with up to 3 percent of purchase price in seller concessions, according to sales professionals. And when it comes to loans issued with the backing of the Federal Housing Administration or Veterans Affairs, up to 6 percent of sales price is allowable, and is becoming a popular option, agents and brokers said.
Right now, for example, a $5,000 credit toward closing costs — or a gift card for that amount — is being offered by the seller of a four-bedroom colonial in Wall Township that has been for sale for 16 months. The offer is being advertised as part of the independent broker Robert Bruno’s listing on Zillow.
Built five years ago, the house then cost $565,000, according to public records. It was offered for resale at $499,000; the price was reduced several times, and is now $459,900.
Four months ago, when Zillow began offering, for a fee, to highlight seller concessions on listings, Mr. Bruno opted in. The $5,000 concession offer appears in yellow highlighting under the price on the listing.
“Is it more attractive to save money over the life of the mortgage, or to bring less money to closing and have some cash available at the time of move-in?” Ms. Baldwin asked. “Generally, I would say nothing beats a price cut to make a sale. On the other hand, some people have to scrape just to come up with the higher down payments required now, and need some cash.”
In southern New Jersey, Christopher McKenty, a broker at Re/Max Connection, has a West Collingswood house listed on Zillow with a $2,500 “special offer.” But he says price cuts are “the name of the game.”
A price reduction still gets more attention, he said, adding that he probably won’t use the concession gambit in the future.