Page Two: Sellers get creative: Desperate to unload their homes, sellers are trying everything from auctions to essay contests

Continued From Page One

Auctions: This house

is going once, going twice

Auctions

have long been a popular route for selling luxury property and, on the opposite

end of the spectrum, foreclosed homes. But recently, owners of mainstream homes

have been taking their property to the bidding block. A growing number of real

estate agents and auction companies specialize in this niche -- online auction

site RealtyBid.com, for instance, had record business in 2007, though auctions

represent a mere 1 percent of all real estate transactions, according to the

National Association of Realtors.

Advice to sellers:

Auctions can be especially useful if your house is unusual or difficult to

price. “Done well it can be an excellent way to market property, NAR spokesman

Walter Molony says. “But, a lot of people who try an auction end up having to

go the traditional route anyway because they can’t get their minimum price.” (Bottom Line:

Still catching on with buyers. Worth trying if you understand the risks.)

Advice to buyers:

This can be a good opportunity for investors, says Jon Boyd, past president of

the National Association of Exclusive Buyers Agents. Still, for someone looking

for a home to actually live in, the likelihood that the house up for auction is

a good match may be slim. In any case, make sure you inspect the property and

set a limit on how much you pay. “What you don’t want is to get caught up in

the auction mentality,” says Boyd. (Bottom Line: Worth a shot, if the price right.)

Incentives: Take

everything, and the kitchen sink

Over the past year, builders have been enticing buyers with

the promise of upgraded appliances, trips to Europe and luxury car leases. Why?

They’d rather hand out freebies than drop the recorded price—thereby affecting

the value of all the other houses they have on the market. Now individual

sellers have started wooing buyers with free stuff. The most effective

incentive, say experts, is good old-fashioned cash—to go toward a buyer's down

payment, mortgage points or closing costs.

Advice to sellers:

Cash incentives are a great way to distinguish yourself. “For a lot of buyers,

this can mean the difference between being able to buy the house or not,” says

Jay Papasan, coauthor of Your First home:

The Proven Path to Home Ownership. (Bottom Line: A great low-risk way to get

buyers’ attention.)

Advice to buyers:

Don’t let the free plasma television distract you from what really matters: the

right house at the right price. (Bottom Line: Worth considering, if you think of the freebie as icing on the cake.)

Seller financing: No

down payment? No problem!

Seller financing fell out of vogue during the real estate

bubble, when many lenders thought nothing of giving buyers 100 percent

financing. Now that banks are tightening their belts, some brave sellers are

offering to help finance the purchase of their own house. In a typical deal,

the seller will lend the buyer 20 percent of the home’s purchase price, which

the seller can then apply toward the down payment. (Buyers will need to

disclose this loan when they shop for a first mortgage.) The arrangement is

similar to a traditional second mortgage in that the buyer agrees to make

monthly payments of principal and interest over, say, a five-year period. If

the buyer goes bust, however, the seller gets in line behind the bank holding

the first mortgage.

Advice to sellers:

This tactic is worth trying, especially if you’re hoping to appeal to

first-time buyers, says Irwin. “The tricky part is making sure you have a buyer

who is going to pay you back.” Scrutinize the buyer’s credit and income, and

make sure terms of your agreement are all spelled out in writing. (Bottom Line: A good option if you have equity to spare.)

Advice to buyers:

Assuming you can afford the extra monthly payment and can’t get a better deal

from a bank, this can work out quite well, says Boyd. “We rarely see cases of

seller financing where the buyer is taken advantage of.” (Bottom Line: If the

terms make sense, go for it!)

Lease options: Take

this house for a test drive

A lease option is another route for sellers to appeal to

buyers who might not otherwise be able to get their foot in the door. In a

typical arrangement, the would-be buyer pays the seller a non-refundable option

deposit worth anywhere from first and last months’ rent to 2 percent of the

home’s value. That deposit gives the buyer the option to buy the house within a

specified period of time for a specified price or one that’s tied to market

value. Then, for the duration of that period, the buyer pays rent plus an

additional amount to be put toward the purchase price. When the time is up, the

renter/buyer can either buy the house or walk away, usually sans option

deposit.

Advice to sellers:

If you can afford to keep your equity locked up in the house, this is one way

to cover your expenses and entice buyers or renters who otherwise wouldn’t give

the house a second glance. “It can be a win, win,” says Papasan. In some

states, these transactions are highly regulated. So be sure you know the rules.

(Bottom Line: An appealing option if you don’t mind playing landlord.)

Advice to buyers:

If you’re not ready to buy but don’t want to miss out on this buyer’s market, a

lease option can be a great deal—provided you have a legitimate seller. Plan to

work with a real estate expert who can negotiate on your behalf, says Boyd.

(Bottom Line: If you work with the right seller, this can work very well.)

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