Realtors, Buyers Turn to Incentives to Keep Sales Moving

Realtor arranges gimmicks to keep market in motion

Realtor arranges gimmicks to keep market in motion

RISMEDIA, December 13, 2006-(MCT)-After building up some equity in their Hyannis condominium, Peter Trombley and his wife were interested in moving to a starter home last winter. But with the market slowing down, Trombley, a 40-year-old lawn care company owner, worried he wouldn't be able to sell the condo in time to close on another property.

He tried seeking help from several real estate agencies, but none offered him any assurance he could pull off the sale in time. Then he found Danny Griffin.

Griffin, a broker who started a firm in Hyannis about two years ago, provides a buffet of incentives for both buyers and sellers. The gimmicks offered by Danny Griffin Real Estate include "zero down" financing, which he arranges with a mortgage broker, and "trade-up" deals in which he purchases the property of a buyer who opts for one of his listings.
To Trombley, who had been eyeing one of Griffin's listings- a two-bedroom ranch in West Yarmouth- the deal sounded perfect. In February, Trombley walked into Griffin's office the owner of a condo and left as the proud owner of a house.
"If we didn't do the buyback program, we wouldn't have gotten the house," he said.

As the real estate market cools, unusual incentives like those offered by Griffin are gaining more traction among buyers and sellers, according to the handful of agents on the Cape who offer the deals.

"The purpose of all of theses programs is really to educate the public that there's things you can do" to more easily buy or sell a house, said Griffin, whose yard signs bearing the words "zero down" and "buy this home and I'll buy yours for cash" have become prolific on the Mid-Cape.

While the number of real estate sales on the Cape so far this year has fallen by about 24% compared with last year, according to the Barnstable County Registry of Deeds, Griffin's sales have been pretty steady. Griffin anticipates his agency will close 115 sales, just slightly below last year's number of 126. Griffin credits the incentives with his success in staving off the slowdown.

"You have buyers who have completely lost confidence in the marketplace," he said, adding that his incentives help fix that.
Realty Executives broker Chuck Tuttle, in Hyannis, said his pledge -- that he will sell a house within 120 days or buy it himself -- has helped him remain successful even in a slowing market.
"The climate of the market and the increase in inventory, as well as the increase in days on the market, has made this program interesting to more people," Tuttle said.

In addition to Griffin's much-advertised "zero-down" and "trade-up" deals, and Tuttle's sales guarantee, there are other incentives. Griffin's arsenal also includes a "buyer protection program" in which buyers can sell their properties back to Griffin if they decide they want a different house. An East Falmouth real estate investor and sales agent, Charles Dowick, also offers help finding flexible financing arrangements, a "trade-up" program and rent-to-own plans for some of his own properties, in addition to an assortment of custom incentives.

In some cases, agents say, the special offers can be a godsend to moderate-income buyers who need a little help purchasing a property or to sellers who are anxious to move.
"If I keep offering incentives, it opens a lot of doors for people," said Dowick, who runs Home Buyers of Cape Cod.

But as with any special deal or promotion, real estate incentives likely come with their share of fine print, and may not be in the consumer's best interest, said Jack Guttentag, professor emeritus of finance for the Wharton School at the University of Pennsylvania.

Although "trade-up" and rent-to-own plans and sale guarantees are widely different transactions, all are highly complicated and tend to shift the advantage to the property owners who offer them, he said.

In the case of rent-to-own deals, there may be provisions the buyer doesn't anticipate, such as a clause canceling the sale option if the rent is late, he said. Any no-money-down loan for a property is also going to be more expensive than a traditional mortgage, Guttentag said. Agreements where agents pledge to buy properties also have their own share of caveats, he said.

Agents will likely pay less for the property than what it might get on the open market, he said.

"The agent knows the market a lot better than a seller, so he's in a position to make that kind of offer with minimal risk," Guttentag said.

He said he would also be wary of whether the real estate firm had the capital to make good on its promise.
"Your typical real estate firm is not in the business of buying houses," he said.

Although he's offered the incentive for several years, Tuttle said he's never had to make good on his 120-day sales guarantee but is financially prepared to do so. Griffin has bought two condos as part of his "trade-up" program over the past two years.

Dowick hasn't had any takers on his own "trade-up" deal, which he started offering just a few months ago, but he buys and sells properties in the regular course of his business.

There have been a few attempted rent-to-own deals since Dowick started advertising that program about a year ago, but two fell through. He said he's found more success with turning some former tenants in some of his properties into buyers by helping them find financing.

All the agents say that when buying a property from a client, they would likely pay somewhat below market value. They say they explain that, and the caveats of other various incentives, to sellers.

Trombley, one of the participants in Griffin's "trade-up" program, declined to discuss the price at which he had planned to list his condo, or what Griffin eventually paid for it. According to documents on file with the registry of deeds, Griffin paid Trombley $165,000.

Trombley acknowledged that the price might have been less than what he would have received if he had tried a traditional approach to selling his condo.

But, he said, he is still a satisfied customer. "He basically sold the condo for what I would have sold it for if I was alone," he said.

Copyright 2006, Cape Cod Times, Hyannis, Mass.

Distributed by McClatchy-Tribune Information Services.

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