NYT: San Rafael Seller Incentives

People are getting so desperate to sell their obscenely overpriced houses that they have to offer all sorts of "incentives" to sell; anything but actually lowering the asking price to the point where it can sell in today's market. These sorts of "price reductions" never appear in official statistics (e.g., from the NAR, CAR, etc.) no doubt because it would take some effort to measure them and would make the real estate statistics look even worse than they already do.

Previously these sorts of incentives only happened "over there"... in "armpit" locations (to use a common Marinism). You know, in Sacramento, San Diego (or Southern California in general), Vegas, etc. Never in Marin.

I've already pointed out some instances where Marin sellers had to offer incentives (e.g., here, here, here, and who knows what else), but this one, featured front and center in The New York Times, has to take the cake:

...consider a three-bedroom house surrounded by oak and redwood trees, not far from the Golden Gate Bridge, in San Rafael, Calif. Reluctant to cut the price from its current listing of $1.54 million, its owners are instead offering a weeklong vacation time-share, every year for life, worth about $10,000, or an equal amount toward lease of a car.

Apparently, one of the owners is being transferred to Atlanta and so there is some urgency to sell.

With very little effort I was able to find this house listed at ZipRealty.com. Here is a picture of it along with what the listing agent has to say:

Constructed in 2004 in the exclusive baywood terrace estates. From the moment you step through the dramatic entryway onto the bamboo floors, the open floor plan will beacon you with luxury. The chefs kitchen and great room features custom cabinetry. The living room adjoins a cozy den, and adjacent deck and fireplace. All bedrooms are suites. A lower level family room opens on to a large deck and to the beautifully landscaped huge yard with spa.

It's a nice house to be sure (I visited it when these houses were first made open to the public, but it's in a rather shabby area) but no mention of the vacation time-share for life thing in that write-up.

The current owners purchased the house (new construction) on March 12, 2004 for $1,279,000. It's been on the market for 109 days. Here is the recent sales pricing history for this house:

Price Reduced: 06/06/06 -- $1,695,000 to $1,649,000
Price Reduced: 07/06/06 -- $1,649,000 to $1,625,000
Price Reduced: 07/12/06 -- $1,625,000 to $1,575,000
Price Reduced: 07/27/06 -- $1,575,000 to $1,535,000

From the NYT article:

But these discounts [incentives, e.g., time-shares, cars, etc.] are almost entirely missing from the statistics on new-home prices reported by the government and on existing-home prices reported by the National Association of Realtors. As a result, home prices may now be falling, despite what the official numbers show, many economists say.

The use of rebates helps home builders and individual sellers by making the real estate market look healthier than it may truly be and by preventing a snowballing decline in home prices. It also keeps commissions for real estate agents higher than they would otherwise be.

At some point these incentives won't work. Afterall, you are better off getting a price reduction, so as to lower the property tax you have to pay year after year after year, than these sorts of incentives.

Let the "snowballing" begin. Here's how.