The Bonus Is Back! Why That May Not Be Good News.

Every day my email contains subject lines offering “Bonus to Selling Agent!” I actually found 46 messages in my inbox right now by searching the word “bonus”.  

These bonuses span the spectrum. $1,000. $2,000. $5,000. $10,000. $12,500. $20,000. $25,000. Even one for $50,000.

Obviously, the big bonuses are on multi-million dollar homes. Mom and Pop Smith at 123 Main St are not offering a $20,000 bonus on their $198,000 home.

I am also noticing the bonus is often accompanied by a price reduction.

One example: “$10,000 Selling Bonus to Agent plus $100,000 Price Reduction” offers a nice incentive to the buyer, too.

 Why are there so many bonuses being offered right now, and what does it mean for the market?

Some of the listings were taken with a discounted commission and the bonus is just getting the compensation back up where it is competitive. Sellers want to turn up the excitement, not turn off their prospects. Cutting corners is not a great strategy if you are serious about selling.

Even some of the bank owned homes are offering bonuses. That may also fit into the compensation-adjusting group. When the investors started gobbling up anything that said foreclosure, many banks cut commissions at a time when multiple offers were piling in overnight.

It is easy to imagine agents getting pretty excited at the prospect of earning a bonus on a sale. However I am cognizant of the bonus frenzy we had during the market crash.

The incentives were getting extreme back then. There were even offers of a Mercedes as a bonus, on numerous properties. Anything to stand out and get attention for one property over the others.

Please, don’t misunderstand me. I am not implying we are in a crashing market scenario. We are not, at least not in our area. Sales are brisk and demand is strong in most segments of the market.

There are a couple of areas with softening: The high end luxury home market is temperamental, as it is wont to be from time to time. Some of the buyers just seem willing to take a step back from the rising prices and hold out for a better deal. Others, of course, are participating in sales that are setting new records!

The resale homes that are in price ranges that compete with new construction are suffering the most right now. New home sales are smoking hot. The “used homes”  are having to price very attractively to garner attention from buyers. Some of our historically popular neighborhoods are seeing price reductions and bonuses to compete with new construction.   

Many folks wonder, “Are we in a real estate bubble again?”

No.

Not yet. Here is the warning sign to look out for:

During the bubble that burst in 2006, everyone was buying real estate, but no one wanted to own it. People were just getting into the chain of title, or getting a contract on a home, so they could resell it for a big profit, sometimes literally overnight, without having to do anything at all to improve the property.

It was plain goofy and made no sense. A home isn’t worth $20,000 more just because it is a week older. Or even a month.

There are always some investors and flippers in the market. But during the heyday, everyone wanted to act like a big-time, sophisticated investor.

Today, most of the sales are to people who actually want to own the property, and that is a healthy sign for real estate.

All real estate is local. Talk to your favorite full-time licensed professional so you make the best decisions for your personal situation.

Get Serious. Get Sweat.

All the Best!

Jim Sweat, ABR, CLHMS, CRS, CDPE, GRI, e-PRO

Realtor

Re/Max Alliance Group

Mobile: 941-306-7384

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All the Best!

Jim Sweat, ABR, CLHMS, CRS, CDPE, GRI, e-PRO

Realtor

Re/Max Alliance Group

Mobile: 941-306-7384