"Last Chance! Don't Miss Out on the $1,500 Tax Credit!"

Overpaying $3,000
to Get Back $1,500?

I fielded a call this week from a client -- her mailbox filled with flyers touting the expiring $1,500 tax credit -- asking how much a forced air furnace should cost to heat her 1,700 square foot townhome.

My answer: anywhere from $3,500 to $4,500, depending on the make, capacity, and number of "bells and whistles."

Which is interesting, because the vendor she called -- in response to their ad pushing the $1,500 credit -- quoted her about $8,000.

I don't know that other vendors are doing this, but as always, it pays to shop around, and get multiple quotes.

Crying Wolf

Aside from the occasional overcharging contractor, vendors who've been bombarding the public with "Last Chance" ads have, I suspect, a "crying wolf" problem: even though the credit really does expire on December 31, they've been pushing the credit's "imminent" expiration for the better part of two years now (in other words, ever since it was enacted).

It's also the case that the federal tax credit is "up to $1,500"; if you read the fine print, it's actually 30% of the total outlay.

So, if you spend $4,000 on qualifying windows, a new furnace, etc., the total credit would be $1,200.

Creating Buyer Urgency ("Threatening the Pooch")

Real vs. Manufactured Urgency

If you don't buy this magazine, we'll shoot this dog.

--National Lampoon cover (1973)

Buyers who feel no sense of urgency don't buy.

But creating that sense of urgency is a tricky thing for would-be home Sellers and their agents.

There's "faux" or manufactured urgency -- and then there's the real thing.

"Faux" Urgency

In the former category, I put the various and sundry deadlines I've been seeing pop up on MLS and in marketing literature lately. Consider these two examples:

Last Chance! This is your last chance before this gorgeous home goes off the market Nov. 14.
--Orono listing

Final Price Reduction!
--Andover listing

In both cases, the problem for the Seller is, what happens after the deadline comes and goes?

Unfortunately, often times today the home goes into foreclosure. While that means the home will be off the market for a period of time (and its condition will deteriorate), it also usually means that the home will be dramatically cheaper in the next 6-8 months.

Result?

Buyers have an incentive not to quickly buy the property -- but to wait.

Even if the only deadline is taking the home off the market during the slow holiday season, Buyers are likely to interpret this as weakness, not strength.

What such Sellers are really saying is, "we haven't been able to sell our home the last [fill in the blank] months, so we're going to give it a rest."

My guess is, many such Sellers, if presented with a real offer in the interim, would reconsider.

And Buyers know that.

Which is the final problem with Seller deadlines, especially if they're self-imposed (vs. set by a third party like a bank): they're not real.

Just like parties in a negotiation are disinclined to believe that any offer or counter is really "final," Buyers are (rightfully) dubious that the Seller can't simply extend or void any deadline if it suits their purposes.

Real Urgency

By contrast, at least in my experience, there's really only one scenario that creates genuine Buyer urgency: when a property is in good condition, attractively priced, and attracting serious interest from multiple parties (lots of first showings, several second showings, etc.).

In such situations, Buyers -- or at least Buyers who know the market -- sense that they have a limited amount of time to make their move before someone else does . . . without the listing agent having to say a thing.

The rest of the time, efforts to "light a fire" under Buyers more often boomerang.

That's because it's transparent that the only party who feels a sense of urgency . . . is the Seller.