Who wins when sellers offer buyers a credit?

A bath obviously needs work.  The walls need another coat of paint.  The floors need to be refinished.

Such are among the improvements that sellers might be quick to acknowledge.

Their idea, which often is endorsed by their brokers enthusiastically, is to offer a credit to the buyers.  To their thinking, it’s a win-win situation: Buyers are tempted and sellers are rewarded with a contract.

But as Westchester broker Phil Faranda, a friend of mine and inveterate blogger, recently pointed out, it is a bad idea that causes more problems than it solves.  He observes:

If the credit is for a full-price offer, the buyer will simply view it as a price reduction from the outset, or money with which the seller was already willing to part, and use that as a baseline. If a full-price offer is not a condition of the seller’s credit, then removal of that incentive is viewed as a bait-and-switch tactic.

Why not merely have the asking price reflect the seller’s acknowledgement of the property’s condition?  After all, the price has to take into account other deficits such as poor layout, outdated kitchen and undesirable views.

Equally pointless is offering brokers a bonus, the existence of which really must be disclosed to the broker’s client.  (The post doesn’t consider the ethics of brokers who steer their clients toward prospective purchases that mean more income, but I find such a practice distasteful.)

No consumer is about to buy a property that doesn’t feel right, and anyone with a brain may well discount a bonus as a gimmick that implies property defects.

As usual, Phil gets it right.

Tomorrow: Numbers mislead

To take your own bite out of the Big Apple, you can search privately for a new home here.

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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022

M: 347-886-0248
F: 347-438-3201

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