Buyers Cash Rebates Improve Connecticut Homes Sales
The value of Connecticut homes is one indication of the slump in the nation wide real estate market
. Creative brokers have come up with some options to overcome the challenges of lackluster sales. Cash back rebates or buyers cash rebates are great for buyers. Typically, buyers are paid 2 percent of the home's purchase price. With a home that sells for $200,000, a buyer would get a rebate of $4,000.The cash rebate comes from the broker's sales commission. The commission is usually distributed with 3 percent going to the seller's broker and 3 percent going to the buyer's broker. In order to stimulate sales the broker will give 2 percent to the buyer in cash, and only keep the 1 percent commission, that is, 1 percent of the purchase price. The seller, the buyer and both brokers win with the cash rebate. Even the buyer's broker is happy. Despite the fact that he gave two thirds of his commission to his client, he gets to keep 1 percent and the cash rebate effectively encouraged the sale.
Cash back rebates are not the traditional way of doing business for brokers. One brokerage firm in Connecticut called SGI Realty One actively advertises the cash rebates and targets its business to buyers. This innovative method of stimulating sales has worked for the firm and its customers. The economic environment of 2008 was the impetus for cash rebates. With unprecedented foreclosures and so many home owners in a financially precarious position something needed to be done to counteract all the challenges facing the real estate market.
There are two sides to these real estate stories. Home owners who had adjustable rate mortgages could not keep up with escalating mortgage payments. The market saw an unprecedented amount of foreclosures and short sales. Home prices dropped and suddenly people who could not afford to buy a home found that they could become a homeowner. Brokers saw an opportunity to encourage buyers and earn commissions. Getting 1 percent of a commission beats getting 3 to 6 percent of nothing.
Bethel, Connecticut is an example of the dramatic drop in home values from 2006 to 2010. In 2006, the low, mid and high prices in Connecticut were $306,000, $419,000 and $551,000. Fast forward to 2010 shows a sharp decline with low, mid and high prices dropping to $196,000, $319,000 and $363,000 respectively. Creative financing was needed to jump start slow sales.
The SGI Realty One Web site has a graphic schematic showing a flow chart with the 6 percent sales commission. The total sales commission is 6 percent, with 3 percent going to the seller's broker and 3 percent going to the buyer's broker. To encourage sales, the broker rebates two thirds of his commission to his buyer client. This cash rebate has successfully stimulated sales at SGI.
As a buyer's broker, SGI is motivated to get the lowest price possible for the buyer. This mind set underscores the importance of the buyer having his own representation, as opposed to working with the seller's broker. With a purchase agreement in place long before any sale takes place, the buyer is guaranteed payment of his cash rebate.
The cash rebates that are working for Connecticut homes have proven effective in other parts of the country. With more homes on the market than buyers wanting to purchase them, the law of supply and demand kicked in and the prices of homes declined. The good news is buyers can get much more house for less money. This coupled with buyers cash rebates will hopefully help improve the real estate market.
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