Offering Buyer Incentives: Do’s and Don’ts

Incentives have become a common reality again for new home buyers. Here are some do’s and don’ts if you decide to offer incentives to buyers.

Do: Make Incentives Attractive

It may seem obvious, but you can do more harm than good if the incentives you offer aren’t attractive. The buyers you’re likely to work with will be savvy—it’s one of the reasons they can be in the market at all. This means the incentives you offer must truly incentivize them, rather than just having the appearance of an incentive.

For example, if the homes you build already include option and upgrade incentives before you even build the house, consider offering closing cost incentives with preferred lenders or another kind of incentive.

Don’t: Let Incentives Cut Into Your Top-Line Prices

The goal of incentives is to avoid cutting your top-line (gross) price. Though the market is shifting toward buyers, it doesn’t portend to be an all-out buyer’s market. So, there’s simply no reason to lower your top-line price to attract buyers.

The incentives you offer should be gravy. As you’ve likely experienced, if one buyer balks or even cancels despite incentives, you’ll probably have another waiting in the wings.

Do: Know the Market to Determine Incentives

Certain markets favor certain incentives. According to Zonda’s chief economist, Ali Wolf, here are the most popular kinds of incentives:

• Closing costs with preferred lenders
• Option and upgrade incentives

But when you dig deeper in the data, it becomes clear that certain markets have certain preferences.

For example, the Dallas and Washington, D.C., markets tended to prefer closing cost incentives—whereas Denver, Atlanta, and Las Vegas showed no signs of closing cost incentives.

Don’t: Use Blanket Incentives

Piggybacking on “know the market,” it’s crucial that don’t treat every buyer the same when offering incentives.

For instance, wealthier and cash buyers have typically not felt the pressures of price appreciation, inflation, and higher interest rates as much as entry-level buyers.

While this doesn’t mean you should only offer incentives to entry-level buyers, it does mean that you’ll need to consider your audience when offering incentives. For instance, entry-level buyers may be more interested in incentives like rate locks and buydowns, whereas those incentives may ring hollow to more well-heeled buyers.

Do: Become a 2-10 Builder Member

Structural warranty coverage is an obligation. Offering the most-trusted name in structural warranty administration is an incentive. With 2-10 Home Buyers Warranty (2-10), you can offer the most-trusted structural warranty administration on the market and fulfill your obligations.

In fact, buyers want a 2-10 New Home Warranty:

• 94% of prospective home buyers are more likely to purchase a new home from a builder who offers a structural warranty.
• Four of five buyers value a third-party, insurance-backed structural warranty.

Whether you’re a volume builder, a luxury home builder, multifamily home builder, or are in the midst of succeeding in the build to rent space, 2-10 can help you protect your profits, promote your quality, and plan for the future by controlling what’s behind you.

Don’t: Not Protect Yourself With 2-10

You can’t have a “do” without a “don’t.” But seriously, why choose another structural warranty administrator when you can choose 2-10? Our national footprint, four decades of experience, and clearly stated guidelines have allowed us to constantly lead the pack in structural warranty coverage.

With coverage that begins on Day 1, coverage that fits your needs, and exclusive programs that cut down on the long tail of liability, it’s no surprise that builders trusted 2-10 more than anyone else.

Give your buyers and yourself the incentive of the most comprehensive structural warranty administration on the market. Become a Builder Member today.