By Toby Welch
Innovative marketing ideas are necessary to draw attention to a listing in tough real estate markets. An often-used tactic is to offer freebies to buyers. From flat screen TVs to boats, cars, vacations and shopping sprees, sellers are doing whatever they can to get that SOLD sticker on their front yard. Everyone loves to get something for free but do the incentives work?
A desperate East York, Ont., home seller wasn’t having much luck selling his $379,000 detached two-storey house so he decided to throw in a $15,000 car to sweeten the deal. The sales rep and the property gained from the increased exposure but ultimately the house didn’t sell with the car. The seller had to lower the price and remove the vehicle incentive to move the property.
Penny Naldrett
Penny Naldrett, a sales rep with Sutton Centre Realty in Burnaby, B.C., had buyers that offered an incentive. “The sellers owned the gym on Bowen Island. They offered two annual memberships to the buyers of their home. I don’t think it was the deal maker/breaker but it certainly gave them good exposure for their new business and the buyers enjoyed the perk.”
Lisa Salt has never used these types of incentives. The 17-year veteran sales rep with Re/Max Vernon in Vernon, B.C., says, “I find a price reduction is the best answer to a property that isn’t selling. I would much rather see the seller reduce the price than throw in incentives unless it is something they don’t want.”
A lot of brokers and sales reps agree that the selling price is the bottom line. Some buyers are scraping together every penny they can find to purchase a home and could care less about a fantasy vacation. They would rather have a lower purchase price than a price that masks the cost of sending the buyers on vacation.
Naldrett makes an interesting observation; incentives are used a lot more in the United States. “I used to sell real estate in Naples, Fla. Down in the States it was much more prevalent to offer a bonus to the buyer’s agent than I have seen up here in Canada. My clients offered a $10,000 cash bonus on a $3.6 million sale. The house did not sell and expired at the end of its term. I remember one house that had a Bentley as the bonus to the sale.”
No matter what incentive the sellers plan to offer, make sure it’s all on the up and up. Suzanne Anderson, a sales rep with Re/Max Fort McMurray in Fort McMurray, Alta. says, “Offering incentives…has to be done through a real estate brokerage with the broker’s approval…these are Real Estate Council of Alberta rules. The seller can offer any incentives direct to the purchaser, through the brokerage. However, we cannot advertise any incentives to the public unless it is approved through our brokerage, or approved by the seller, and any terms or conditions attached to these incentives must be disclosed to potential buyers.”
Lisa Salt
When offering incentives, check with your broker to find out how to do it properly. If you have any additional questions, CREA recommends you check with your provincial real estate association or council.
There are three instances when incentives may be especially helpful:
* When a home is listed in order to distinguish it from the competition.
* When a home has been on the market for a number of months and sellers don’t want to lower the cost but need to get buyers interested.
* During negotiations when the buyer needs a nudge to get the deal closed.
As Naldrett points out, in the U.S. the use of incentives is more commonplace. Here are some examples of this practice:
* A Realtor in Texas offers a Glock pistol with the purchase of any home from her. Although you don’t need a license to own a handgun in Texas, this offer is only valid for people in law enforcement.
* A sales rep in Rhode Island tailors the incentive to the house he is selling. In the past he has offered landscaping services for a year and a free bathroom renovation.
* One North Carolina brokerage offers free lodging for out of town buyers who are in town to look at properties.
Some U.S. brokers and sales reps even offer incentives to entice people to look at a property. One Rhode Island Realtor gave 30 days worth of free groceries to anyone who looked at the property. A sales rep in Georgia offered the first 200 people who became a fan of their Facebook page a $10 Starbucks gift card.
In 2009, a sales rep in Newmarket, Ont. was trying to sell a number of new homes but couldn’t unload the properties in a slow market. She offered to throw in a 2010 KIA sedan, a vehicle with a $15,000 value, with the purchase of a home. No one took her up on the offer, preferring to get rebates instead, but the incentive got more potential customers through the door. Another sales rep in Ontario was offering a free parking stall (in some cases a $35,000 value) with the purchase of certain condo units.
In a challenging real estate market, sales reps and sellers have to find a way to stand out. Is offering incentives the right way to achieve that?
