WASHINGTON (TheStreet) -- Now that popular tax credits for homebuyers have expired, sellers and realtors are offering free appliance upgrades and $8,000 incentives to keep buyers from putting off home purchases.
offered up to $8,000 for first-time buyers who entered into a binding contract by April 30, and up to $6,500 to homeowners who upgraded to nicer
. The incentive, which began last year, helped ease the property market's painful decline. Now that the credits have expired,
companies are offering their own incentives for buyers and sellers, some equal to the value of the tax credit.
Through June 30,
is running "The $8,000 List Your Home Sweepstakes," giving sellers who list their homes with the real estate company a shot at winning $8,000. Twenty-one prizes will be awarded, one per month for seven geographic zones.
Other realtors are encouraging sellers to offer their own credits to woo buyers off the fence. Courtney Snyder, a
realtor who serves Greater Boston, has been suggesting that sellers offer a credit toward the buyer's closing price, making the deal contingent on a sale.
"It incentivizes a buyer to get an offer in," he says. "It's like a price adjustment that gives the buyer a little bit of control."
Coldwell Banker has formalized that strategy companywide. On May 1, the company launched the Buyer Bonus Sales Event, a campaign in which participating sellers offer a 3% credit on a home's purchase price -- up to $8,000 -- for buyers who sign a contract before July 31. The sellers take the hit, but they receive yard signs tagging them as participants, promotion on the realtor's Web site and the benefit of a national TV advertising campaign publicizing the event.
In condominium complexes, which are often the residences of choice for first-time buyers, developers have been adding free appliance upgrades and discounts on closing costs and condo fees, says Dave Liniger, chairman and co-founder of the real estate giant
in Denver. And in some small towns and cities, realtors are persuading local businesses and shops to offer discounts to new residents.
The $8,000 tax credit pushed many first-time buyers to make offers. In a recent survey of Coldwell Banker real estate agents, 34% cited the tax credit extension as the primary reason their customers initiated a home search. Home purchase applications were up 9% in April versus March as buyers rushed to beat the April 30 deadline, according to the Mortgage Bankers Association, a Washington trade group representing the real estate finance industry.
"It certainly decreased the inventory of unsold homes," says Jed Smith, managing director for quantitative research at the National Association of Realtors, a Washington-based trade association with more than 1 million members. Now that they've expired, "the market could go down anywhere from 100,000 to 300,000 sales," Smith says.
Last month, 5.3 million properties were changing hands at an annualized rate, compared with 4.6 million a year earlier. In November, when another first-time home buyer's credit was set to expire (but eventually received a five-month reprieve), sales surged to a rate of 6.5 million, according to the NAR.
In a possible sign of what's to come, mortgage loan applications were down 2.9% for the week ending April 23, compared with the previous week, an indication that losing the tax credit means some loss of appeal for would-be buyers. "We're all kind of wondering what's going to happen come May," Snyder says.
"Unfortunately it will take people on the bubble of affordability off the market," says Pam Liebman, chief executive of the
, a real estate firm that focuses on the New York market.
Property investors have also been outbidding potential homebuyers, especially when it comes to bank-owned homes. Investors can afford to pay cash and skip the home inspection and average buyers can't.
"The current market is being very heavily influenced by first-time buyers and investors, and often the investors are getting the upper hand," Liniger says. "What we see repeatedly is that if sellers have an offer from a consumer and an offer from an investor, you'll see them take the offer from the investor."
This trend has been prevalent in short sales, transaction in which the proceeds are less than the balance owed on the property's loan. These deals comprised 18.6% of home purchases in March, up from 12.6% in November, according to data from
But there's reason to hope, depending on whether you view inventory as a good thing.
"We've actually seen a slight increase in inventory, which tells us that sellers are gaining faith in the market," says Kevin Sears, co-owner of
Sears Real Estate
, which sells houses in Massachusetts, where the number of homes for sale in March was up for the first time in 23 straight months compared to the same months the year before, according to the Massachusetts Association of Realtors. Nationally, inventory in March amounted to an eight-month supply based on current sales rates, according to the NAR.
Realtors are also hopeful that loosening restrictions on loans will help offset the expiration of the tax credit.
"We're excited about banks starting to get more aggressive with qualified buyers and qualified properties," Liebman says. "The pendulum swung way too much. It went from being way too easy to get a loan to way too hard."
-- Reported by Carmen Nobel in Boston