From the Record:
Housing slump has sellers using novel incentives
When the housing market gets tough, sellers offer incentives.
Sometimes they are simple: Help with closing costs, property taxes or monthly maintenance charges. A free kitchen cabinet upgrade.
At other times the incentives are over the top. In Demarest, builder American Properties of Iselin is offering to park a Maserati (worth about $125,000) in the garage for any buyer who forks over $2.2 million to $3.6 million for a new luxury town house in Bellaire, a 34-unit complex in a French chateau style.
Offering the car is better than simply cutting the house price by $125,000, said spokeswoman Karen Kessler, because “our buyers are not looking for a bargain; they’re looking for some pizazz and some excitement.”
Sellers began using incentives, along with price cuts, as home sales slowed in New Jersey and the rest of the nation this year. The National Association of Realtors reported that existing-home sales in New Jersey fell 16 percent from the second quarter of 2005 to the second quarter of 2006, the most recent statewide figures available. Nationwide, house prices and the pace of sales have dropped over the past year.
Incentives are popular for a number of reasons. For one thing, they are a bit more dramatic than the standard price cuts – although many sellers who use incentives also have cut prices.
But incentives can be easier for builders to swallow.
“The fact that they’re giving back $10,000, $20,000 or $30,000 in extras somehow seems a little more psychologically palatable than taking down the $500,000 sign and putting up a $470,000 sign,” said Michael Schonberger, an adjunct professor of real estate financing at Rutgers University.