I found an article in the Edmonton Journal about a family in Calgary that is offering $5000 for the buyers to put towards their wedding. They say it was their first home after they got married and they want to pay the good karma forward to another young couple. Interesting? Yes. Good idea? I think not.I have a number of problems with this strategy.
First off, their offer is only of interest to a small group of buyers. I'm sure there are plenty of couples who are already married, or those that don't plan on getting married that would also be interested in the home, let alone young families and other demographic groups.
Second, the lender must be made aware of the cash back offer and may not approve.
Third, they will get more attention by lowering their price than by offering cash back. In this case the home is listed at $409,900. So anyone looking for a home up to $400,000 won't even be aware of this home and will never know about the $5000 incentive. If they were priced at $400,000 even, then buyers searching up to $400,000 will find the home, as well as buyers searching from $400,000 and up (if you price at $399k only th will find the home).
The proof is in the pudding... the home has been on the market for over a month. While I'm not up to speed on the nuances of the Calgary market I am aware that it is quite "hot" right now. If their strategy worked their home would be sold by now.
The same agent mentions an incentive last year where two of her clients offered $1000 worth of beer to the buyers of their homes. In the end neither buyer chose to take the beer (I assume they just reduced the negotiated price by $1000). It seems to me these schemes are just an attempt to get some media attention and in this case it worked out well for the listing agent, but I don't think it's done anything for the home owner.
Other "bribes" I have a problem with include:
We'll throw in the with the home - offering unattached items does not encourage buyers to select your home over another home. Choosing a home is an emotional decision but a buyer won't choose the wrong home for them because there is a free boat included. If you're thinking of including a home entertainment system, piece of furniture, pool table, hot tub or other random item (chattel) with your home, offer it up as a carrot during negotiations. The buyer will place less value on the items if they're offered to begin with, and of course the lender may have an issue financing certain items as part of a mortgage. If you get close to a deal, you can always say "we'll throw in the hot tub if you take this counter offer" or something to that effect. Better yet, keep these items completely separate from the sale of the home - nothing is more painful than watching a negotiation worth hundreds of thousands of dollars fall apart over a $500 sofa. It is easy to lose sight of the big picture when it is jumbled up by all kinds of little items. (The exception to this of course is appliances which are commonly included and generally expected to come with the home in Alberta).
The buyer's agent bonus - we frequently see cash bonuses offered to buyer's agents and we are particularly unimpressed with this strategy. As a buyer's agent it just feels icky when you're showing a home offering a bonus (unless you have a low moral compass). In fact, our brokerage's policy is to rebate any portion of the commission over and above the agreed amount back to our buyers. If a buyer's agent takes a bonus for selling a home, and there is some sort of a problem down the road, they are in deep %&$! when the lawyer for the other side points out the fact that they received a bonus for selling the home in question.
Contests - less frequently we see offers like: "visit this home and be entered into a draw" or "the agent that sells this home will be entered into a draw for $10k." For the buyer to be entered into a draw they'd have to leave their name and contact information with the seller or the seller's brokerage, and read a bunch of fine print, and generally be distracted from their goal of finding a home. For the buyer's agent to win a prize they have to attend the draw, which ends up being a recruiting session for that brokerage and a party for their agents, so no one outside the listing brokerage attends. In other words, buyer's agents typically ignore this offer altogether.
In most cases you are better off reducing your price than offering cash, bonuses, prizes or chattels in the sale of your home.
About Sara MacLennan
Sara MacLennan is the Director of Marketing at Liv Real Estate and a licensed Real Estate Associate. The bulk of Sara’s experience and wealth of expertise lies in on-line technology and marketing both for agents and consumers. Sara is the former National Director for Interactive Marketing for Coldwell Banker Canada where she was responsible for an extensive training program traveling to offices across the country training agents and brokers on marketing and technology. Find Sara on Twitter @edmontonblogger.
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I totally agree. Gimmicks like this only indicate that the listing price is not competitive.
Same goes with the “I buy houses” signs on highways. There are well over 5000 MLS listings on the market. Plus ones on Comfree/Kijiji. Plus new constructions. If a person can’t find a good deal there, he is trying to find someone to rip off.
This is off the topic slightly, but my neighbour told me something the other day that I am having trouble believing so am coming to the experts.
A number of years ago they bought a home in Morinville. The house had hardwood flooring throughout the main floor. When they purchased the home, the hardwood was in great shape and even though the seller had a big dog, they advised it was an outside dog only. The day they took possession, the hardwood floors had been scratched to the point they had to get them refinished. The owners had let the dog run wild in the house, yet they were told there was nothing they could do about it as it was considered normal wear and tear and the seller was off the hook. Having never purchased a resale home, what happens if there is damage that wasn’t there when the home was purchased. How do buyers protect themselves?
That is a good question, but it is off topic – we will post a new article addressing it shortly.
I completely agree with this article. Purchasing a home is probably the most important investment a person will ever make. Offering $1000 worth of beer or throwing in a certain insignificant rebate will do little to nothing in affecting an individual’s final decision in purchasing a property. In the end, the property’s appreciating potential, overall condition, surrounding community, and matching atributes to the buyer’s wants is what’s most important in affecting an individual decision to purchase a property.
I dont see a problem with this at all. The person buying the property knows exactly what he/she wants and if at the time its $5000 more for a wedding, why not.
People are presented with choices everyday, in this scenario they should know whats best for them.
On the other hand, if it was a scenario they were unfamiliar with and they could get into serious trouble… thats another story. The people who know have a moral obligation to speak up
Sara: the use of the contraction “they’re” (they are) in lieu of “their” in the second paragraph (First off, they’re offer is only of interest to a small group of buyers.)
is indicative that you do not use any spell check. Also telling that your posters do not grasp the English grammar.
The proof is in the pudding…
Expat …you’re such a wank.
Edmonton Expat, I read the blog for information, not spelling or grammar. If that is the best comment you can come up with, then that is just sad. Not enough doom and gloom for you lately so you have to go on the personal attack?
Thanks for the grammar lesson… I’m fully aware of the correct use of they’re and their but I was working on about 3 hours sleep with two new babies screaming in the background. I think I did pretty good, I mean well. btw… your grammar sucks too.
Being picky about the grammar of the blog owner is one thing, and then expanding it to the posters and saying they do not grasp the English grammar is another (ridiculous) thing.
BTW, aren’t you one of those posters?
Also telling that your posters do not grasp the English grammar.
Hey, buddy… the above sentence is unreadable. It makes no sense.
What an ignorant comment made by a presumably petty person. Great blog though!
I just saw this Expat comment. Sara you are doing a great job. If your grammar was so important to Expat the proper way of handling it would be to contact you personally. However it would seem he would rather try and give you a shot publicly. I envision a 40 year old in his mothers basement who after finishing second in the national spellathon when he was 8 years old went into hiding for 30 years and now has re surfaced as a spelling and grammatical superhero. Saving the world one improperly use semi colon at a time. Ha. Keep up the good work Sara.
What a pompous statement. All the hard work Sara injects into this blog, and yet some people really need to act like a jerk.