They hosted a backyard party with food and an open bar, invited the neighbors and professional contractors—in case potential buyers had questions about remodeling. To top it off, they’re offering their own $8,000 rebate on the $675,000 home.

Three years ago, such cash enticements were the norm—and cash was only the beginning. Sellers regularly tried to lure prospective buyers with free cars, big-screen TVs and stainless appliances at closing. But after nearly a year and a half of a government tax credit program, sellers have scaled back on marketing gimmicks and buyer incentives, largely in an effort to limit their losses.

Meanwhile, new rules aimed at reducing the risk of mortgage defaults have made many once-common incentives illegal, so many sellers are simply resorting to one of the oldest tricks in the book: dropping the price.

Aaron Dickinson of Edina Realty says that buyers today have access to more information about the market than ever before, so competitive pricing is the best way to attract attention. “At the end of the day, buyers aren’t stupid,” he said. “Gimmicks don’t work well when buyers have so many avenues to be educated about what’s for sale and what has sold and for what price.”

In addition, buyers are worried about the economy and their job and have focused on getting the best price—and the lowest house payment—rather than a free perk. Indeed, many buyers are making decisions based on the assumption that someone in their family might lose their job, said Stephanie Gruver, a sales agent with Keller Williams Integrity Lakes in the Minneapolis-St. Paul, Minn., area. “They’re buying on one income rather than two, and they’re buying within their means,” she said.

Perhaps the biggest reason for the decline in seller incentives comes from the mortgage industry itself. In an effort to reduce defaults, the government has cracked down on all forms of seller incentives. New rules are designed to eliminate any exchange of cash or property before and after a closing that might affect how much equity a buyer has in their new home. That’s an about-face from a time when underwriting standards were much less stringent and cash-back signing bonuses and other perks were a common way to help push buyers over the fence. The goal now is to maximize a buyer’s investment in the hopes that they’ll be less likely to walk away from their obligation.

Current government loan guidelines limit seller contributions—usually in the form of closing costs—on conventional mortgages to 3% of the purchase price; FHA loans allow a 6% contribution, but that’s going to be reduced to 3% during the next few months.

Lenders say that losses are mounting on mortgages in which appraisers failed to discover—or sellers failed to disclose—incentives that were never deducted from the sale price of the house. That’s led to improperly priced loans and inaccuracies in valuations. Already Fannie Mae and Freddie Mac are asking lenders to repurchase billions of dollars in improperly underwritten mortgages, including some in which enticements weren’t properly disclosed.

The government tax credit was a particularly good deal for cash-strapped buyers and sellers because it wasn’t tied to the value of the house and it arrived in the form of a check with few restrictions on how it could be spent.

To buyers spoiled by such an offer, that makes the prospect of pre-recession incentives seem a little less enticing.

“Incentives from the seller don’t replace the incentives from the federal government,” Dickinson said. “Oftentimes, it’s easier to do a price reduction than offer a rebate.”

That was Coldwell Banker’s thinking when, after the expiration of the government’s $8,000 tax credit, in June it asked its sellers to offer prospective buyers a 3% discount for purchases made by the end of the month. Participation was limited, but sellers are likely weary of still-lower prices.

But party-giver Foley, a professional marketer, attributes the pullback on incentives to an all-out surrender. “Everybody has had a hard time selling,” he said. “It doesn’t mean you stop. It’s almost as if people, including sellers and Realtors, have given up. They’ve lost faith in what they knew.” The bottom line, he said, is that sellers and their agents need to get creative and have more fun.

An evening storm rolled through Minneapolis the night of the party, which Case and Foley put together with the full support of their real estate agent. They promoted it with just about every form of social media, from Facebook to Twitter, and a few phone calls to local media. But in the hour and a half that a reporter attended the two-hour party, no prospective buyers showed. The 30 or so guests were largely friends, neighbors or the media.

Foley said several prospective buyers showed up eventually, but added his goal wasn’t to reach a high number of prospective buyers, but rather find the one who wants to buy the house.

“I’m not saying that we’re going to reap success and sell our house, but as a marketer, my chances of succeeding are greatly enhanced by putting forth some sort of imagination and effort,” he said. “Some sellers are literally giving away thousands of dollars because they haven’t given sellers a reason to buy their house. If we can market water for $7 a gallon, don’t tell me you can’t find a reason to make your house more charming or exciting for someone.”

Sales without incentives:
In lieu of attention-grabbing incentives, here’s what works best today:
-Price it right. Buyers have access to lots of data, and they’ll know if your house is too expensive.
-Offer to pay some of the buyer’s closing costs.
-Maximize exposure. Saturate the Internet and all forms of social media with your listing.
-Use great photos, not good ones. Make sure your house makes a great first impression.
-Make it sing. Listing information must be complete and well-written.
-Curb appeal matters. Spend a little money on flowers, new plants and fresh paint.
-Inside, your house should look fresh, so make sure the paint, carpeting, light fixtures and appliances are updated and clean.
-De-clutter. Eliminate one-third to two-thirds of your stuff; hire a stager.
-Network. Sales come together because brains understand homes better than computers.
-Be patient. Statistics say that it takes 21 showings, not including open-house traffic, to sell a house.

(c) 2010, Star Tribune (Minneapolis)

Distributed by McClatchy-Tribune Information Services.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Copyright© 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

Four states—Florida, California, Nevada and Arizona—accounted for all top 20 metro foreclosure rates. Florida led the way, with nine of the top 20 metro foreclosure rates, followed by California with eight, Nevada with two and Arizona with one.

“While we’re seeing early signs that foreclosure activity may have peaked in some of the hardest-hit markets, foreclosures continued to rise in three-quarters of the nation’s metropolitan areas in the first half of the year,” said James J. Saccacio, chief executive officer of RealtyTrac. “The fragile stability achieved in many local housing markets hinges on improvements in the underlying economy, specifically job growth. If unemployment remains persistently high and foreclosure prevention efforts only delay the inevitable, then we could continue to see increased foreclosure activity and a corresponding weakness in home prices in many metro areas.”

Top 10 metro foreclosure rates
Las Vegas continued to post the nation’s highest metro foreclosure rate in the first half of the year, with 6.60% of its housing units (one in 15) receiving a foreclosure filing—more than five times the national average. A total of 53,525 Las Vegas properties received a foreclosure filing during the six-month period, a decrease of nearly 15% from the previous six months and a decrease of nearly 9% from the first half of 2009.

Foreclosure activity in the Cape Coral-Fort Myers, Fla., metro area decreased nearly 22% from the previous six months and was down nearly 30% from the first half of 2009, but the metro area still documented the nation’s second highest metro foreclosure rate—4.98% of its housing units (one in 20) received a foreclosure filing during the six-month period. Other Florida cities in the top 10 were Orlando-Kissimmee at No. 8 (4.15% of housing units) and Miami-Fort Lauderdale-Pompano Beach at No. 10 (3.89%).

With 4.59% of its housing units (one in 22) receiving a foreclosure filing, Modesto, Calif., posted the nation’s third highest metro foreclosure rate. Other California cities in the top 10 were Merced at No. 4 (4.47% of housing units); Riverside-San Bernardino-Ontario at No. 5 (4.37%); Stockton at No. 6 (4.37%); and Vallejo-Fairfield at No. 9 (3.91%).

The Phoenix-Mesa-Scottsdale metro area in Arizona posted the nation’s seventh highest metro foreclosure rate, with 4.28% of its housing units (one in 23) receiving a foreclosure filing in the first half of 2010.

Metros with highest foreclosure totals
More properties received a foreclosure filing in the Miami-Fort Lauderdale-Pompano Beach metro area during the first half of 2010 than any other metro area with a population of 200,000 or more. A total of 94,466 properties in the Miami area received a foreclosure filing during the six-month period, a decrease of 8% from the previous six months, but up nearly 11% from the first six months of 2009.

A total of 93,263 properties in the Los Angeles-Long Beach-Santa Ana metro area received a foreclosure filing in the first half of 2010, the second highest total of any metro area nationwide and 2.11% of all housing units (one in 47)—ranking No. 35 in terms of foreclosure rate.

A total of 78,022 properties in the Chicago-Naperville-Joliet metro area received a foreclosure filing in the first half of 2010, the third highest total and 2.07% of all housing units (one in 48)—ranking No. 37 in terms of foreclosure rate.

Other metro areas with the 10 highest foreclosure totals were Phoenix-Mesa-Scottsdale (73,352), Riverside-San Bernardino-Ontario (63,717), Las Vegas-Paradise (53,525), Atlanta-Sandy Springs-Marietta (52,381), Detroit-Warren-Livonia (47,563), New York-Northern New Jersey-Long Island (44,522) and Orlando-Kissimmee (37,352).

For more information, visit www.realtytrac.com.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Copyright© 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

Members of the Coalition delivered a letter to Secretary Geithner and representatives at the U.S. Department of Housing and Urban Development, Federal Housing Finance Agency, Federal Trade Commission, Securities and Exchange Commission, Farm Credit Administration, Department of Veterans Affairs, Federal Reserve Board, Deferral Deposit Insurance Corporation, National Credit Union Administration and Office of Thrift Supervision, declaring their opposition to Wall Street Home Resale Fees and calling on the Obama Administration to ban their use.

“This dangerous new fee is a prime example of Wall Street investors trying to profit from unsuspecting homeowners,” said Kurt Pfotenhauer, President of the American Land Title Association. “We’re asking Secretary Geithner to stand up for Main Street homeowners and buyers and stop the use of Wall Street Home Resale Fees today.”

Manhattan-based Freehold Capitol Partners is leading the push to add these fees to home purchase contracts. The fees require that a percentage of the final sale price of a home be paid to a private third party every time the property is sold, typically for 99 years. Freehold is attempting to then sell the right to collect these fees on Wall Street.

“As the leading advocate for homeownership and housing issues, the National Association of Realtors strongly opposes home resale fees, or private transfer fees,” said Lucien Salvant, Managing Director for Public Affairs at the National Association of Realtors. “They add an unnecessary and unfair burden to the real estate transaction for either buyer or seller.”

The Coalition to Stop Wall Street Home Resale Fees has already been active, raising awareness about the issue and taking action to stop these dangerous fees.

To date, 17 state legislatures in Arizona, California, Florida, Hawaii, Illinois, Iowa, Kansas, Louisiana, Maryland, Minnesota, Mississippi, Missouri, North Carolina, Ohio, Oregon, Texas and Utah have recognized the dangers of Wall Street Home Resale Fees and have restricted their use.

An official with the U.S. Federal Housing Administration confirmed that the government will not insure mortgages for properties with Wall Street Home Resale Fees and the U.S. Department of Housing and Urban Development confirmed these fees violate HUD’s regulations.

“At a time when state and local governments are cutting services to the bone, it makes no sense to force them to use tax-payer dollars to dole out unearned profits to Wall Street,” said AFSCME President Gerald W. McEntee. “This financial scheme is a pipedream for Wall Street and a nightmare for everyone else.”

“Owning a home has always been part of the American dream—for veterans and non-vets alike,” said Jon Soltz, Co-Founder and Chair of Vote Vets. “We fought to preserve the American dream for all, but these greedy Wall Street Home Resale Fees mislead homeowners and make that dream more difficult to attain.”

“This country has seen enough abusive financial practices to last a lifetime,” said Uriah King, Vice President of State Policy at the Center for Responsible Lending. “Now, yet again, homeownership and family wealth are at risk because of Wall Street’s unscrupulous practices.”

“One had thought that the concept of serfdom had been abolished centuries ago, but Wall Street is trying to re-introduce the concept through these near-perpetual fees,” said Andrew Langer, President of the Institute for Liberty. “When I own my home “free and clear” it means that I have the right to keep any profits through its sale. This practice forces a landowner into a third-party’s fiefdom, watering down individual rights in the process.”

The Coalition to Stop Wall Street Home Resale Fees has organized to fight the dangerous financial scheme of transfer fee covenants and to protect homeowners across the country.

For more information, visit http://www.stophomeresalefees.org.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Copyright© 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

But increasingly, economists and other analysts are expressing concern that the United States could be edging closer to a different problem—the kind of deflationary trap that cost Japan more than a decade of growth and economic progress.

And as Tokyo’s experience suggests, deflation can be at least as tough a problem as the soaring prices of inflation or the financial pain of a traditional recession.

When deflation begins, prices fall. At first that seems like a good thing. But soon, lower prices cut into business profits and managers begin to trim payrolls. That in turn undermines consumers’ buying power, leading to more pressure on profits, jobs and wages—as well as cutbacks in expansion and in the purchase of new plants and equipment.

Also, consumers who are financially able to buy, often wait for still lower prices, adding to the deflationary trend.

All these factors feed on one another, setting off a downward spiral that can be as hard to escape from as a stall in an airplane.

For now, the dominant theme of the nation’s economic policy debate remains centered on the comparative dangers of deficits and inflation. However, economists across the political spectrum—here and abroad—are talking more often about the potential for deflation.

So how likely is the problem?

The latest U.S. data are sobering: Consumer prices overall have declined in each of the last three months, putting the inflation index in June just 1.1% above a year earlier. The core inflation rate—a better gauge of where prices are going because it excludes volatile energy and food items—has dropped to a 44-year low of 0.9%.

That’s well below the 1.5-2% year-over-year inflation that the Federal Reserve likes to see, and some Fed policymakers have raised concerns about the rising risk of a broad decline in prices.

Private economists and financial experts have expressed much greater concern.

“I think we have to take it seriously,” said John Mauldin, president of Millennium Wave Advisors in Dallas, who puts the probability of deflation at more than 50%. Among the reasons he cites: a lot of unused labor and production capacity, increased savings and the low speed at which money is changing hands.

“It’s a good bet that by some measures we’ll be seeing deflation by some time next year,” Paul Krugman, the Nobel laureate economics professor, said this month in his New York Times column. He went on to scold the Fed for standing idle while the nation is “visibly sliding toward deflation.”

But the Fed’s chief, Ben Bernanke, appears to think deflation fears are overblown. During his semiannual testimony to Congress last week, he told senators that he didn’t view deflation as a near-term risk.

In the Fed’s latest forecast, core inflation is projected to stay at the current pace this year, then gradually rise toward 1.5% in 2012.

Should deflation occur, the central bank has the tools to reverse it, he said. But many question whether the Fed can do much more, given that it already has pushed interest rates to historical lows and pumped more than $1 trillion into the financial system.

Also, Bernanke said, America’s economy is more vibrant and productive than Japan’s was, and its labor force isn’t declining, whereas Japan’s has been for much of the last decade. Japan also was much slower in addressing problems with its banking sector than the U.S., he said.

Japan’s aging population and rigid business and political systems have clearly contributed to the country’s long economic malaise, which began in the 1990s. But there are some notable similarities with America’s latest economic slump.

In both cases, real estate bubbles burst after years of rapid growth and low unemployment, exposing poor loans and serious problems with financial institutions and regulations.

In both countries, the crash led to a sharp fall in real estate prices and financial markets and to soaring unemployment.

Yet the scope and economic fundamentals of the two crises are very different, said Richard Katz, editor of the Oriental Economist Report, a New York newsletter focusing on Japan and U.S.-Japan relations. Commercial land prices in Japan’s six largest cities soared 500% from 1981-1991, Katz said, and the bust took them down below 1981 levels.

The U.S. housing slump has been bad, but nowhere near that severe. And whereas bad debts pervaded Japan’s entire economy, Katz argued, the U.S. recession wasn’t the result of structural flaws, but rather of excesses in the financial system that came from deregulation and other policy mistakes that he sees as correctable.

“The policymaking response in the U.S. is better, in part because of the precedence of Japan,” Katz said, noting that it took Japan’s central bank nearly nine years to do what the Fed in essence did in 16 months: bring short-term interest rates to zero.

But like Japan, some analysts suggest, the U.S. is heading into a long period of stagnant growth, in large part because of high unemployment and an overhang of debts that will restrain consumer spending—now at 70% of the nation’s gross domestic product.

Those factors tend to hold down wages, putting more downward pressure on prices. And once deflation sets in, consumers may hoard cash or try to pay off their debts faster, fueling the downward spiral of spending and growth.

Bernanke said bond-market measures and consumer surveys show little change in expected inflation. “And that stability of inflation expectations is one important factor that will keep inflation from falling very much,” he said.

Some economists remain skeptical, saying such expectations can turn very quickly or conditions can change in stealthy ways.

“People don’t see it coming,” said John Makin, a visiting scholar at the conservative American Enterprise Institute. He said he doesn’t take much stock in consumer surveys about inflation expectations because most people have been ingrained to expect inflation in the future, not deflation.

Makin also thinks some price declines are indirect and not reflected in government reports. Many online retailers now provide free shipping, and more businesses are offeringspecials such as “buy two, get the third free”—the functional equivalent of price cuts.

In one measure that Makin calls a “flashing red light,” yields on 10-year Treasury bonds, which rise with inflation worries, have slipped to less than 3% from 4% in April.

Among businesses, many restaurants are feeling the squeeze because they’re finding it tough to pass higher costs along to customers.

Prices for restaurant food rose 1.2% this June from June 2009, much slower than the 3.8% rise during the year-earlier period. Meanwhile, the purchasing cost for restaurant operators this June was up 4.7% from June 2009, said Hudson Riehle, chief economist at the National Restaurant Assn.

Charlotte Kubsh, a St. Louis-area homemaker, would not be surprised that businesses have little power to raise prices. She said her husband, who works for a trucking firm, didn’t get a raise last year.

They’ve long been strong savers, she said, and with their income seemingly frozen, they don’t plan any big spending any time soon.

(c) 2010, Tribune Co.

Distributed by McClatchy-Tribune Information Services.

RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

Copyright© 2010 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

Outdoors, the bright white stucco exterior is elegantly contrasted by rich dark wood singles, architectural elements and wood-framed windows. Red brick flooring gives way to two covered seating areas in addition to the two-car garage. The porch overlooks the home’s immaculately landscaped yard, featuring lush greenery and sculpturally-laid white walking stones toward the detached guest home—a 900 square foot studio with a full bath and kitchenette. A custom built-in outdoor oven and stove completes the outdoor space, creating a perfect backdrop for intimate gatherings or larger entertaining.

Coronado, also known as Coronado Island and the “Crown City,” is an affluent city located five miles from downtown San Diego, California. Located on a peninsula connected to the mainland by a 10-mile isthmus called the Silver Strand, known locally as “The Strand,” Coronado boasts three world-class resorts.

On August 12, 2010, Concierge Auctions will conduct a live, on-site luxury real estate auction. Originally listed for $2,899,000, the auction is absolute, meaning the property will sell to the highest bidder regardless of price. The sale is in cooperation with Ashlee Nicolls of Park Life Real Estate.

For more information, visit www.CoronadoLuxuryAuction.com.

To submit your Featured Listing, send 300-500 words on the property, surrounding area, and how you’re marketing it to Paige@RISMedia.com. Don’t forget to submit photos and an accompanying URL!

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