Incentives Can Stimulate Home Sales

March 2, 2007
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GRAND RAPIDS — As more and more homes come on the market, builders are getting more creative in finding ways to sell their new houses.

Ed Pynnonen, Grand Rapids and Lakeshore Division president for Eastbrook Homes, said the company has several options to help prospective clients build a new house, including the Sales Guarantee program, Safety Net program and the Site Purchase program.

"What we do is we try to tailor it to each individual," he said.

With the Sales Guarantee program, the buyer's current house is appraised and a purchase price is set at which the company will buy it if it's not sold by the time the new house is completed.

"We put in a price that we buy it at that's discounted enough that we have some money in there; then we can afford to carry it," he said. "Oftentimes, they get it sold before the house gets completed."

Pynnonen said the program gives the buyers peace of mind.

The Safety Net program is another way to take the worry out of building a house. Eastbrook Homes will pay up to six months of house payments on the current house after the new house is completed, giving buyers 12 months to sell their house: six months while the new house is being built and an additional six months thereafter.

"That program has been probably more successful for us than the trade, because I think people come to terms with 'If I price it right and I have a year to sell it, that's a better route for me to go,'" he said.

Another option that prospective buyers have to keep costs down is the Site Purchase program, where buyers close on a lot with a locked building price for a year while their current house is on the market.

"You just have to work really hard at solving people's problems," Pynnonen said. "We've been doing this for about a year. We just saw that, probably with a bit of softening in the housing market, more people had a home to sell."

Builder James Rau also has offered options to prospective buyers over the years, including guaranteeing the sale of the buyer's old house by taking the house in trade and then selling it himself.

"I've even taken boats and cars in trade," he said.

Rau said it helps people have more flexibility when looking at new housing options.

"I started doing it back in 1981 and 1982 when interest rates were real high," he said.

When working with prospective buyers, he tells them to put their house on the market and look at him as a last resort if the house doesn't sell.

"If they can sell it themselves for $1,000 more, then look at that as a bonus," he said. "Primarily, my main business is new construction, but I've always enjoyed wheeling and dealing in real estate."

Rau said he has one property in Jenison that he has sold and traded with five couples throughout 20 years, working with many people as repeat customers.

"It's worked out very well and I've had a lot of fun with people, helping them get started," he said.

Bernard Markstein III, director of forecasting in the economics group of the National Association of Home Builders, said many builders nationally are providing incentives.

"That's partly because there's an overhang in inventory," he said. "We're working through that. When that goes away — and I'm talking over the next three to six months — you're going to see those incentives go away."

Markstein said some of the incentives he is seeing are upgrades, such as higher quality cabinets or countertops. Some companies will provide $10,000 gift cards from home improvement stores as incentives.

"Some will put a new car, a new SUV in your driveway or garage," he said. "These are higher priced houses; these are the $700,000, $800,000 houses where you'll get that."

Pynnonen said while Eastbrook Homes has many promotional programs, it is not in the habit of giving away cars or home furnishings.

"I think a lot of that is, people aren't looking for a car or furniture. They're looking for a fair price and they want someone to solve their problems."     

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