Incentives Multiply in Southwest Florida Housing Market; Buyers Should Use Caution

The slow-moving Southwest Florida housing market has Bradenton real estate agent Frank Maruca settling into the driver’s seat… of a 2007 Lexus ES 350.

According to the Sarasota Herald-Tribune, Maruca owns the distinction of being the only agent who took advantage of Neal Communities’ summer 2006 sales incentive program aimed at moving inventory homes the company built in East Manatee County.

The deal was: Sell homes; get a car.

In a post-boom market where sellers are having a tough time making buyers get out their checkbooks, both builders and individual home sellers are throwing in a lot more than the kitchen sink. Some are incentives aimed at buyers. Others are designed to entice real estate agents, faced with an abundance of inventory, to show specific properties to clients.

Right now, home buyers can choose from a one-dollar-down deal or a $3,000 free furniture deal from one of two major builders. Or they can pick an existing home and then wangle a Florida mortgage buy-down paid for by the seller. All that can come on top of price cuts that are already higher than normal.

In Port Charlotte, Ryland Homes is offering a huge $3,000 Rooms To Go gift certificate in front of potential buyers to promote sales in the Suncoast Lakes subdivision, where you can get into a 2,100-square-foot home, with the bushes already planted, for $245,000.

More common are commissions and bonuses aimed at real estate agents, like the 4 percent that Neal is paying. On a $300,000 home, that means an extra three grand in commissions.

Southwest Florida is by no means alone in facing a buildup in inventory and a downturn in home sales and prices for those homes that agents do manage to sell. But in this region, where home sales saw outsized gains in 2004 and 2005, the news is worse than most places. Sales fell by a third, and the median price is 11 percent lower than a year ago.

“I think where you are going to see the incentives is somebody with a lot of inventory that they’ve got to get rid of,” said another builder, Mark Caithness, founder of Caithness Homes of Nokomis. “Like a U.S. Home or somebody like that that has a couple of hundred homes to sell.”

Caithness is right on the money… so to speak. Lennar, one of the biggest tract home builders in the nation and the owner of the US Home brand, also gets the current prize for the flashiest incentive program:

“Move in for $1, 100 percent financing and no closing costs.”

The deal is available on town houses starting at $179,900 and on single-family homes starting at $229,900. These are pre-built in the Stoneybrook subdivision along River Road in east Venice, and also at Lighthouse Cove within the Heritage Harbour subdivision in Manatee County.

The dollar deal can be combined with ongoing price cuts now being labeled as “Homes for the Holidays.” The goal is simple: Get that inventory off the books by the end of the year, then begin anew in 2007 with Florida home mortgage rates still at historic lows.

Here is the way it works on one of the mid-$200s homes at Stoneybrook: You pay an earnest money deposit of $5,000. If you back out, Lennar keeps the deposit. Lennar absorbs the closing costs, plain and simple.

To get the deal, a buyer is required to use Lennar’s affiliated Florida home loan lender and sets up the mortgage (with no down payment) at 5.25 percent the first year, 6.25 percent the second year, and then 7.25 percent from then on for the life of the 30-year loan.

The 7.25 percent rate that would prevail for the life of the loan is 11/4 to 11/2 points higher than the best 30-year fixed rate loans being quoted by the majority Florida mortgage brokers for conventional 80 percent financing.

“They aren’t really giving that much away,” said one skeptical lender. “They are promising a no-closing-cost program but they are making you use their in-house lender, and then inching your mortgage up.”

The reason many are not impressed is that a Florida mortgage broker gets paid a percentage - and the higher the rate they deliver to the customer, the more the lender is satisfied and the more they pay the broker.

Brokers could make a lot more selling Florida home loans for 7 1/4 percent, and then offer to pay closing costs - so it may not be as great a deal as it appears on the surface.

For example, under the current mortgage rates, a buyer with good credit could be set up with a 6.25 percent, 30-year fixed-rate loan right this minute, with no strings attached. Take this into account if you’re in the market for a home, so you’re certain you get the best deal for you!