Wednesday, November 01, 2006

Incentives may effect home values

Mary Umberger writes in today's Chicago Tribune about the effect of incentives on housing values. I've touched on this subject here and here. The story sums up a few issues that may pop up when trading incentives with the home...say taxes, real home values and getting your loan. Heyooohhh!

But seriously folks, outright purchase incentives may or may not work depending on the situation. The incentive should be crafted with the market research and make sense for the home or market. I mean... if the property is a dog, an Apple Vacation will not get you to buy it (it will help you forget you own it, I guess).

However, the story points out the most important issue in handleing credits to the buyer; making sure the buyer gets it. An experienced agent and his/her attorney will make sure the lender knows a credit will be issued as part of the deal. The credit should be added to the closing statement, if allowed. If it won't be allowed, and their are many reasons, then the seller and buyer will have to figure out new terms.

As far as home values... well this is why comps are not king! The true story of value is how many buyers at a particular time are willing to pay a certain amount for a certain piece of real estate. Value is subjective too. So, if the last guy paid $450,000.00 for a place, but received $20,000 in incentives (like a car and vacation package), it doesn't mean the next place will sell for $450,000.00. If you base value strictly on comps and not several other market factors...that's your funeral. For example... my downstairs neighbor (and friend) paid only $1000 less than us for a middle floor unit. He discovered we also negoitiated a washer and dryer, upgraded to high end ceiling fans, upgraded bath tile etc... so really, he paid $4000.00 more. He just walked in and paid list from the slaes agent!

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