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Homebuyer Incentive Ideas

 

The housing market is shifting, and, as usual, the changes vary according to region. Some markets have fewer buyers viewing homes, which is most likely the result of the rise in mortgage rates. It is considered a buyers market when more homes are available to a limited buyer pool. When you decide to sell your home in a buyer's market, be ready for competition from other home sellers. There are many ways to make your home stand out, including staging, updating, and good marketing practices. Offering incentives to buyers is another method of enticement, making the purchase of your home more attractive and affordable than the home down the street. 

Let's take a look at some of the more common incentives.

Closing costs

Title search and insurance, notary fees, HOA transfer fees, and appraisal fees are all closing costs. The buyer's average closing costs run between 2% and 5% of the loan amount, which represents a significant chunk of money for many homebuyers. On a $300,000 mortgage, homebuyers can expect to pay between $2,000 and $16,000 in closing costs. Offering to pick up some of these costs for the buyer can make a deal go through. Some sellers offer to split the buyer's closing costs.

Seller Concessions and Loan Types

Seller concession limits are not uniform—they depend on the buyer's mortgage loan. Here are some common types of loans and their associated seller concession limits: 

  • Conventional Loans:
    Seller concession limits for conventional loans typically range from 3% to 6% of the home's purchase price. However, the limit varies based on factors such as the buyer's down payment and the loan-to-value ratio. 

  • FHA Loans:
    The Federal Housing Administration (FHA) allows seller concessions of up to 6% of the home's purchase price or the appraised value—whichever is lower. 

  • VA Loans:
    The Department of Veterans Affairs (VA) typically allows seller concessions of up to 4% of the home's purchase price. 

  • USDA Loans:
    The United States Department of Agriculture (USDA) loan program permits seller concessions of up to 6% of the home's purchase price. 

Buyers and real estate agents must be aware of the specific limits associated with the chosen loan type, as exceeding these limits may impact the transaction's viability. 



Lower the price

If the buyer is having trouble coming up with the down payment or closing costs, lowering the purchase price can be an incentive to continue with the transaction. Not only does this help the buyer immediately by making the home more affordable, but it will assist them down the line when it comes time to pay the property taxes: lower cost equals lower taxes.

 Offer a home warranty

A home warranty is desirable to the buyer of an older home. Home warranties cover most (but not all) major systems in a home, including heating, air-conditioning, water heater, and electrical systems. You can purchase optional coverage for pools, spas, and other items. Purchasing a home warranty for the buyer of your home assures them that, should something go wrong with one of these systems, they will only spend a little money on repairs. The annual average cost of a home warranty ranges from $400 to $700 and can be paid at closing out of the escrow proceeds. Most home warranties also cover the home while it is on the market, so the seller also benefits from the policy! 

Seller Concessions and Loan Types

Seller concession limits are not uniform—they depend on the buyer's mortgage loan. Here are some common types of loans and their associated seller concession limits: 

  • Conventional Loans:
    Seller concession limits for conventional loans typically range from 3% to 6% of the home's purchase price. However, the limit varies based on factors such as the buyer's down payment and the loan-to-value ratio. 

  • FHA Loans:
    The Federal Housing Administration (FHA) allows seller concessions of up to 6% of the home's purchase price or the appraised value—whichever is lower. 

  • VA Loans:
    The Department of Veterans Affairs (VA) typically allows seller concessions of up to 4% of the home's purchase price. 

  • USDA Loans:
    The United States Department of Agriculture (USDA) loan program permits seller concessions of up to 6% of the home's purchase price. 

Buyers and real estate agents must know the specific limits associated with the chosen loan type, as exceeding these limits may impact the transaction's viability. 


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Location: Ann Arbor, MI, USA

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