Signs of The Times
Instead of lowering their asking prices any further, homeowners are looking for creative ways to attract buyers
BYLINE: BY ELLEN YAN. STAFF WRITER
SECTION: REAL ESTATE; Pg. C12
October 20, 2006 Friday - Correction Appended - ALL EDITIONS
Winter is coming, and Long Island builder Steven Klar feels the chill from the buying market.
He doesn't relish safeguarding unsold homes over the winter, paying for snow removal and heating the big, empty insides so the pipes don't freeze and burst.
That's why he's offering a new $52,000 Mercedes to buyers of his model homes in his Huntington, Manorville and Locust Valley developments.
"Does that sound desperate? No, it's making the sale," says Klar, whose models run $697,000 to almost $1.5 million. "It's definitely generated a lot more traffic and interest than ... if we just said ... 'Take $50,000 off the price.'"
Sellers are gussying up homes with freebies to make their properties stand out, a national phenomenon as the market softens. Like companies enticing new customers with giveaways, Long Island sellers have proffered everything from free vacations to making mortgage payments.
Sellers and agents hope these deals will keep home prices, agents' commissions and neighborhood property values up, though some homeowners have become willing to reduce prices.
Sellers' concessions were not unknown before boom years - help on closing costs, the down payment, paying points to lower loan rates - but the perks nowadays are breaking out of the box.
Even open house parties must stand out. In May, one agent threw a party at one of his listings in Oyster Bay Cove, complete with DJ, champagne and models in the pool, though he still has no contract [CORRECTION: An Oct. 20 story in the Real Estate section about an Oyster Bay Cove home where an open house in May included a DJ, models and champagne misstated its sales status. At the time it was actually under contract and last week it was sold. PG. A13 ALL 11/4/06].
Samira Johnson, 48, a biotech consultant, decided to forgo Paris and give a seven-day stay at any luxury Marriott worldwide with the sale of her three-bedroom Northport ranch. She will hand over her 115,000 reward points - having spent $20,000 over two years to earn them - after hearing a California seller offer a year's free beer and pizza.
"Every time I have moved, within six months I take a vacation - I need it," Johnson says. "I thought if I did, other people might need it, too." She'll do another open house this weekend after a lackluster response to her vacation offer.
Giving up Paris didn't take money out of Johnson's pocket, which price reductions will: Since putting the house on the market with a real estate agent in May, she has lowered her asking price from $549,000 to $509,000. She began offering the vacation about two months ago.
Some sellers are looking for ideas that won't cost them. Reluctant to cut prices further, they're resorting to pain-free appeals, including arranging lower-than-current rates with mortgage brokers for the buyers, an unusual private deal.
In April, before Susan, 52, and Dennis Madden, 55, retired from Northport to Tampa, Fla., they advertised their Cape and 20-foot boat as a package deal on Craig's List and elsewhere. "I didn't really get any response," says Susan Madden, a former real estate office assistant.
In the end, the boat sold in June. The house? That went to a separate buyer last week. They had been asking for $699,000; they sold for $675,000.
John Giamarino said he will pay a year's mortgage for the buyer of his $645,000 home in West Gilgo Beach, better than waiting another seven months. "I think if you move into a house and you're not struggling with payments for 12 months, it's just another idea to help," he says.
A buyers' market
As of August, there were 13,999 homes for sale in Suffolk, up 59.3 percent from 8,790 the same time in 2005, says to Mohsen Zandieh, vice president of the Multiple Listing Service of Long Island and treasurer of the Long Island Board of Realtors. In Nassau, the number was 10,041 in August, 66.8 percent higher than 6,018 last year; and Queens' was 10,005, up 76.2 percent from 5,677 a year ago.
Zandieh, who owns Arash Real Estate in Little Neck, says he hasn't seen a lot of incentives but says the market is "correcting itself" after years of rising prices and sales numbers.
For the most part, the median sale price of homes is still higher than last year, he says, and the slower activity stems partly from sellers hoping for boom-time prices and buyers waiting for more price-slumping.
"Sellers are living in last year's market," Zandieh says. "Buyers are living in the future."
Since June, broker Barbara Tomko has been trying to sell a four-bedroom, Colonial-style home in Long Beach. She and the owner thought of the $749,000 Pine Street house like a child - Where did they go wrong? - before deciding to pay the buyer's first year of property taxes (more than $13,000).
Tomko, with Daniel Gale Sotheby's International Realty in Syosset, says she looks at the incentive as a way of "opening up the lines of communication. ... Get them in to see the house and say, 'Oh this is worth more than I thought it might be worth. I don't need to do the roof,'" In fact, the sellers received an offer from someone intrigued by the property tax incentive.
Incentives may not seal the deal, but they're like the opening lines in a real estate version of dating - reasons to meet the house and talk.
Feeling like the perpetual bridesmaids, Larry and Samantha Brittan decided to shell out $10,000 for closing or property taxes after potential buyers kept on picking "the other house."
Already in their new home, the couple pay a mortgage on two houses and see a little relief in the doubling of open house visitors since offering the incentive. "It could just be a matter of somebody sitting there and thinking, 'Do I have enough to cover the closing costs?'" says Larry Brittan, set for another viewing of his Johnston Avenue Colonial in Northport this weekend. Brittan, working with a real estate agent, is asking $559,000 - down from $639,000.
Klar Realty, based in East Meadow, has buyers now for the Huntington and Manorville properties since Klar began offering the cars in August, but both want an equivalent price drop instead of the Mercedes. That's fine with him, he says.
He's even mulling giving the car to whoever takes the home of his potential buyer.
Every Thursday, homes for sale have an agents-only open house, with breakfast at one spot, snacks at another and lunch at a different house.
A gourmet lunch
When it was Ginger Scarpino's turn at her $1.1 million Dix Hills ranch last month, she spent hundreds of dollars and cooked until 2:30 a.m. to create a patio-side gourmet luncheon - caviar, lemon fennel shrimp with tarragon and more. She's also proposed giving a $5,000 bonus to her agents, who declined it, and $11,000 for a buyer's closing costs - all to get that extra edge.
"Maybe it'll work, rather than coming down another $100,000," says Scarpino, 67, who already had reduced the house $400,000. "These days, these agents expect you to come down in big numbers."
The party "definitely showed how you can entertain and how the house flowed," says Prudential agent Debra Friedman, who adds she may have an interested client - the only prospect for Scarpino since last month's fete.
Shawn Elliott's Luxury Homes & Estates last month spent $8,000-plus on an open house for a Gold Coast client who's willing to buy a Mercedes for the agent who bags a buyer.
"He feels motivating the brokers is better than giving the house away," says Elliott, whose Woodbury agency is planning an invitation-only, millionaires' singles open house to show off its new Woodbury town homes. "The larger and more the lavish the event, the more RSVPs."
Some agents frown upon bonuses on top of commissions. They worry buyers might wonder if they're shown good houses or if the agents just want that bonus. (Buyers can find out about such bonuses if they get a copy of the Multiple Listing. Incentives are often at the bottom. Sometimes, the seller will announce a bonus, too, or may have a flyer.)
"I think it diminishes our profession, somehow cheapens it," says Kathryn Martin, a Century 21 agent in Northport.
This month, she began meeting with clients to suggest offering incentives and viewing their homes as "a product on the shelf" by going to competitors' open houses and comparing.
But most of all, agents consider the bottom-line price to be the best draw. "What's the pressure point when the buyers are going to buy?" Martin says. "When you've hit the pressure point, you're going to see it pop."
Calculate the options. At a gourmet lunch at her Dix Hills ranch, the seller announced she would give $11,000 for a buyer's closing costs. Experts say buyers should figure out which options will give them the best deal. On closing costs, the amount may be different depending on whether property taxes have already been paid by closing.
Know the details. With the sale of their West Gilgo Beach home, the Giamarinos are offering to pay the first year's mortgage. Experts say buyers should find out if there's a cap on such a deal and understand payment schedules and options.
Figure out the tax impact. Samira Johnson is offering a free week at any Marriott hotel worldwide with the sale of her Northport ranch. Buyers may have to pay taxes on such gifts, while sellers may get gift or business tax breaks.
READ THE FINE PRINT
Real estate agent Kathryn Martin remembers the days of double-digit mortgage interest rates, when sellers were offering all sorts of contorted incentives to get buyers.
One was the wraparound mortgage, in which the new homeowner took over the seller's existing mortgage. But there were pitfalls.
If the buyer later defaulted, "the seller was potentially liable for the mortgage," says Martin, a Century 21 agent in Northport.
In offering and taking incentives, read the fine print, consult experts and watch out for pitfalls. For example, a seller willing to pay closing costs may be tacking that expense on to the house price, which means the buyer may have to get a bigger loan and pay more interest.
Gifts, such as vacations, may be subject to taxes. "Any of those incentives are like income," says Frederick Mars, a real estate attorney in Hauppauge.
Try comparing out-of- the-box offers to help pay mortgage and other costs with traditional lending programs. "It's like going to the doctor - you have to get a second opinion," says Richard Chertock, a Merrick real estate attorney.
- ELLEN YAN
Copyright 2006 Newsday, Inc. Reprinted with permission.