From cnbc.com:
“This week the cost of buying a home is coming down, way down,” begins the radio ad. The big home builders do it all the time; holiday sales, weekend sales, special end-of-the-year clearance. Now the state of Maine is doing it.
With the Spring season kicking off with a whimper, the Maine Association of Realtors is taking a cue from the builders and launching their own one-week “Clearance Event.” That’s right, at least $10,000 off of participating existing homes. They started the week with 115 sellers signing on, and within a few days that grew to over 900. Some discounts are even larger.
“We’ve been on the market for a couple of months, so by joining the clearance even, it puts us back out in front of some of those people that maybe weren’t thinking about it a few months ago, but are now,” says seller Lisa Lee, who dropped her five bedroom, Cumberland home’s price $10,000 from $507,000. “You’ve got to be competitive, again, it’s a high price point in this market, so it was worth taking the loss.”
The median price of a Maine home is $159,450 according to the MAR, so $10,000 is a big chunk, especially for first-time buyers who are fighting a very tough credit market.
Realtors in Maine, and pretty much everywhere else in the country, will tell you today’s market is all about price.
“It’s a price more than a beauty contest,” Mike LePage, President of the MAR, told me. Location and condition are distant second and thirds.
Is it a gimmick?
Sure.
But these types of gimmicks work, and in today’s market, with so many headwinds against buyers, namely tight credit and zero confidence, a little tailwind is probably worth it.
Nothing price won’t fix…
How does this work? Are they just discounting the listing price, or is it a credit at close? It is coming out the agent’s pocket, the seller’s, or some combination?
I think they are just lowering the list prices, but knocking off $10,000 from a $507,000 isn’t going to impress any buyers.
The purpose of price reductions is to distance the listing from the OPTs. If they all reduce at the same time, no benefit – or at least not the impact desired, though yes it would make the house slightly cheaper to the buyer.
If realtors ever give up on gimmicks, and instead tried to educate the clients, we might get somewhere.
Until then, circus-time all around.
I think it’s a good idea. Create some urgency and make buyers feel like they are getting a deal. Obviously at some point the buyers and sellers adjust (i.e. who buys anything at full retail these days), but it’s not a bad marketing idea. Of course it really comes down to the sellers. A seller can always sell as long as they are willing to come down in price.
You could imagine a 5-10% off second weekend open house sale, to generate a bidding war on a property that’s about to fall out of hot listing status, that would really work.
The hang up is always the seller and possibly the listing agent. The buyers are out there right now.
When I was searching for my house in Boise, a local Coldwell Banker office was offering this similar kind of gimmick. I looked at the list of available homes; nothing even remotely interesting to me…