The National Association of REALTORS© (NAR) released its 2020 Profile of Home Buyers and Sellers recently. Its Profile surveyed Buyers and Sellers between July 2019 and June 2020 to get a sense for each group’s behavior. Today, we’ll focus on one of the more interesting facts from the survey—Seller incentives. We’ll show you which incentive Sellers used most, how it affects you as a real estate professional, and whether the COVID-19 pandemic changed how Sellers provide incentives.
What’s the incentive Sellers used most in 2020?
The incentive Sellers used most in 2020 was a home warranty. There are several ways to interpret this statistic.
First, according to NAR, 17% of all home Sellers—regardless of geographical region—offered a home warranty as an incentive. That’s more than assistance with closing costs (14%), credits toward remodels and repairs (8%), and other incentives like cars or TVs (3%).
While it may be surprising that Sellers used a home warranty even more than cash considerations, it’s not a fluke. The same was true in 2018 and 2019 as well.
Second, when parsed out by geographic region, some more interesting trends emerge. Here are the percentages of Sellers who offered a home warranty by region:
- Midwest: 20%
- South: 19%
- West: 16%
- Northeast: 6%
Only Sellers in the Northeast used cash considerations more often than home warranties (10% vs. 6%). This is a crucial fact. With inventories approaching historic lows and affordability a constant problem for younger Buyers, more Buyers are looking in the Midwest and South for affordable homes. This may indicate that younger Buyers find great value in a home warranty.
Finally, the longer a home is on the market, the more likely Sellers are to use a home warranty as an incentive. In fact, when a home is on the market for five to eight weeks, 24% of Sellers offered a home warranty, compared to 9% of Sellers whose homes were on the market for less than one week.
How does this affect real estate professionals?
The fact that Sellers use home warranties more than any other incentive gives you more control over the success of a transaction. Knowing that Buyers find value in a home warranty gives you an advantage when helping Sellers provide what Buyers are looking for in a home.
Additionally, using a home warranty can make the idea of providing an incentive more palatable for Sellers. A home warranty is more of a value-added incentive than just straight cash considerations. It provides a focused service that Buyers can use if a major system or appliance were to break down within the first year after closing.
That can save Buyers money in the longer term and help Sellers get the most money possible, since the Seller offers a home warranty instead of cash.
Did COVID-19 have any effect on incentives?
Yes, the COVID-19 pandemic had a noticeable effect on the incentives Sellers offer Buyers. Overall, Sellers offered more incentives during COVID-19. While 69% of Sellers offered no incentives before COVID-19, that percentage fell to 62% during COVID-19.
The types of incentives Sellers offered during COVID-19 was especially interesting. There was a tiny increase of Sellers who offered cash considerations (13% before vs. 14% during). But other than cash, Sellers were much more likely to provide Buyers with incentives to protect the home itself.
For example, more Sellers offered credit toward remodels or repairs and home warranties at a much higher clip (7% before vs. 12% during for both). With people spending much more time in their homes, it makes sense that there was more value in protecting or repairing the home.
There’s no better time to partner with 2-10 HBW
Between the consistent trend of home warranties being the most popular Seller incentive and the effects of the COVID-19 pandemic, there’s never been a better time for agents to partner with 2-10 Home Buyers Warranty (2-10 HBW).
When you partner with 2-10 HBW, you can offer Sellers the incentive they prefer to provide to Buyers. Even better, where allowed by law, you can provide complimentary Seller coverage while the house is on the market. That way, your Seller has a low-cost solution should a covered system or appliance break down during the listing period. That goes a long way in moving the transaction forward.
2-10 HBW offers comprehensive systems and appliances home warranties to help protect your clients from unexpected repair and replacement costs. Contact us to learn more.