Home sellers turn inventive with unusual incentives

As the Charlottesville area’s real estate market has tilted in favor of potential homebuyers, sellers are going to extraordinary lengths to sell their homes.

“These days, buyers can say, ‘We want your first born child,’” said Dave Phillips, CEO of the Charlottesville Area Association of Realtors. “And sellers have to consider it.”

The supply of homes for sale in the Charlottesville region has surged. Around the peak of the market, in May 2005, there were 1,708 homes available in Central Virginia. As of Friday, there were 3,753.

With so much inventory, sellers often have little choice but to sweeten deals with incentives.

“Back when we were in a strong sellers’ market, there were no concessions,” real estate agent Marjorie Adam said. “Now buyers expect concessions.”

Home sellers are often willing to knock a few thousand dollars off the listing price, several real estate agents said. And in many cases, they are also paying for closing costs, home inspections and home warranties. Others are willing to throw in furniture, install fencing, provide a decorating allowance and much more.

Pricier homes, of course, generally come with more lucrative incentives. Yet, agents said, even modest home sales are often including incentives and sellers are agreeing to concessions.

One three-bedroom house in Scottsville comes with a 2009 Toyota Prius. Another home being listed in Louisa County includes a $4,000 Visa gift card.

Adam’s firm has drawn up a “menu of concessions” for home seller clients. Buyers peruse the menu and select incentives. These have included offers by the seller to pay for swing sets, interior paint jobs and moving expenses.

“Depending on the situation, a buyer is obviously in the driver’s seat,” said Michael Guthrie, CEO and managing broker of Roy Wheeler Realty. “We’ve got lots of inventory and lots of places for buyers to look at. Buyers are in a position to get the best deal possible.”

When it comes to real-estate negotiations, Guthrie advised homebuyers to focus on what is most important to them. If price is the most important factor, then the buyer should emphasize that the price come down. Do not, he said, try to get every other possible incentive while also trying to drive

down the sales price.

“What are you trying to accomplish?” he said. “Are you trying to get the best price? Then focus on that.”

Although homebuyers have the advantage in the current market, they should not get greedy, real-estate agent Arleen Yobs said.

“Be reasonable and try to be fair,” she said. “But also be ready to walk away and go on to house No. 2.”

Not all home sellers are willing to reduce the price or agree to any other concessions. Particularly when a home is priced aggressively low, Yobs said, it is not uncommon to get multiple offers from potential buyers.

“You can still get a little bidding war going on,” she said. “It’s actually happened to me a couple times this year.”

One concession that appears to be growing in popularity is the “kickout clause,” which allows homebuyers to escape a contract if their existing home does not sell.

Home sellers generally dislike kickout clauses, but buyers sometimes demand them so they are not saddled with two mortgages simultaneously. It is becoming more difficult, real estate agents said, for home sellers to reject a kickout clause.

As of Thursday, there were 42 pending contracts with kickout clauses in the Charlottesville area. A year ago, there was just a handful, Phillips said.

Several real estate agents said they wished there were more balance in the market.

“Clearly we couldn’t have a strong seller’s market forever,” Adam said. “I obviously would like to see a little more ‘power’ restored to the seller. The goal is to have a balanced market.”

In his most recent market report, Phillips likened the local real estate conditions to his recipe for pumpkin meatloaf — a dish defined by its disgusting clash of ingredients.

“Like a good recipe, a good real-estate market is one that features a good balance of ingredients,” he wrote. “If you put in a little too much of one ingredient, the dish may not taste very good; however, if you put in way too much of that ingredient, the dish becomes unpalatable. The recipe for the Charlottesville area real-estate market has way too much of one ingredient — supply of homes for sale — and that has created an unbalanced recipe that is hard to swallow.”