Tempting incentives for home buyers – especially first-timers – seem to be the 'in' thing. At one point or another, governments, builders, and property groups will offer enticing incentives to encourage home purchases. This practice is widespread in a troubled or recovering economy. Yet these offers are around to a certain degree in every real estate market.
Government initiatives have been shown to benefit home buyers. These programs assist buyers who meet the qualifications. The plans might offer a credit (as the expired Federal First-Time Homebuyers' Credit) or access to RRSP savings (Canada's 2009 Expansion of the Home Buyers' Plan).
Yet numerous builders and property groups also make offers to home buyers. Should potential buyers take the bait or resist the temptation? What types of incentives are being put on the table?
Huge Incentives
Australia
Home buyers can find all kinds of offers out there in the marketplace. Sometimes builders and a property group combine to offer huge incentives. The Satterley Property Group and 17 builders in Australia are making a concerted effort to provide affordable housing in specific estates.
With their campaign named "The Lot," offers of cash rebates, bonuses, and incentives can add up to $30,000 savings per home. Satterley provides cash rebates up to $10,000 plus landscaping, fencing, and other attractions. Builders’ bonuses include free pools, kitchen and bathroom upgrades, as well as home entertainment packages, and reverse cycle air-conditioning. Nigel Satterley, spokesman for The Lot, explained the reasoning behind the offers.
“People have been wary of interest rates and in retail, as well as in land and housing, buyers have become cautious. And research shows that a large percentage of young people are pessimistic about 2011," says Nigel Satterly, spokesman for Satterly Property Group.
US
Of course, Australia builders are not the only ones adding on incentives. U.S. home buyers can also receive offers of new pools with a home purchase. In fact, home buyers might be enticed with free vacations, free entertainment centers, or even free cars (leases). Check out a current incentive in Fort Myers, Florida.
The Background of Builders' Incentives
Before buyers accept builders' incentives, they should inform themselves about the practice. The most important point to remember is that builders are in business to make a profit. An incentive should make sense for a home buyer in the long term. Usually, offers come in with a catch.
What could the free vacation cost the home buyer? Is a quick purchase required to claim the vacation? Does the buyer have to make a substantial non-refundable "earnest money deposit"? This deposit is not to be confused with a down payment. When buyers execute a purchase contract, the agreement specifies an amount to secure the contract or "show good faith."
The free vacation or the free product sounds great but the builder will be getting it at a discount. It might make more sense for buyers to shop later for affordable holidays or special sales on products. When buyers factor in required conditions, the 'free' stuff might not seem like such a good deal.
Good Deal or Bad Plan
Indeed, accepting the incentives might be a bad plan. Home buyers do not have to stay away from all builders offering incentives. Yet buyers must understand the builders' goal.
The home purchase – a long-term commitment – must be the buyer's priority. The thrill of a tropical vacation cannot compare to finding the perfect home at the best price. Skip the incentives - if it means that you sacrifice your dream.
Would You Accept Home Buying Incentives?
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