While we are far from the peak of the housing market in 2021 and 2022, things are looking up so far in 2024. Mortgage rates are starting to dip below 7%. Builder sentiment is steadily rising as inflation continues to fall.
The only thing that doesn’t move much are house prices.
Sam Khater, chief economist at Freddie Mac, reported that prices will likely continue to rise “at a steady pace.”
Combined with still high interest rates, these prices make potential home buyers hesitant to re-enter the market. As a result, builders are increasing sales through incentives to buyers.
By 2024, the incentives as a percentage of the sale price reached 4%, almost double the usual amount. Many builders are putting $16,000 to $30,000 into a mid-priced home, a big hit to the bottom line.
So are big price cuts and mortgage rewards the builder’s only option until the market rebounds? Considering it might not be until late 2024, or even 2025, builders need other options.
Now is the perfect time to add an often overlooked and undervalued incentive to your arsenal in the buyer’s war: a system and appliance warranty.
The Wow factor of the guarantee
A standard PWSC systems and appliances warranty costs builders $450 per year. Consider the huge ROI of adding a second year (or more) of coverage to your standard one-year warranty:
- $450 provides $7,500 in coverage, an annualized return of nearly 1600%. Builders can use this amount of protection to reduce the amount they offer in purchases and price reductions without diminishing the overall financial incentive package for buyers.
- Think these new systems and gadgets won’t malfunction? think again Allstate research shows a 33% breakdown over two years at an average cost of $713 each. The price of the warranty exceeds the cost of a single repair.
- The peace of mind that a warranty gives buyers is a competitive differentiator. Warranties help boost a builder’s reputation by eliminating many of the out-of-pocket costs that affect buyers when they are most financially vulnerable after purchasing a home. Warranties make repairing or replacing systems and appliances quick and easy. The claims process eliminates the need to negotiate with contractors or do self-repairs. Owners submit the claim to the warranty provider, who arranges for a qualified service contractor to diagnose and repair the problem. No additional effort is required on the part of builders or buyers.
Consider this: Research shows that customers will share a positive experience with six or more people, while unhappy customers will share a negative experience with more than 15 people. Offering a warranty not only helps close a sale today, but generates future buyers through word of mouth marketing.
- According to the National Association of Realtors, 45% of people bought a newly built home to avoid renovations and maintenance. However, research shows that for 35% of new construction home buyers, premature maintenance is one of their biggest regrets. A systems and appliances warranty helps eliminate many of the headaches and difficulties created by unexpected maintenance issues.
- System and appliance warranties can also improve a home’s resale value. Potential buyers may be attracted to a home with the added assurance of warranty coverage that helps homeowners get a faster sale and a higher price when they decide to make their next move. The security return can offer a greater financial advantage than a multi-year mortgage-type purchase if the buyers will not be in the home long enough to extract the full value.
Attract more buyers with PWSC
PWSC’s HomePRO Systems and Appliances Warranty protects a home against many major mechanical failures and normal wear and tear. Additional benefits include food loss, power surges, additional utility protection and the ability to set an annual rate for five years. PWSC offers an innovative approach to sales incentives that benefit builders while addressing one of the buyer’s biggest fears: unexpected maintenance costs.
Protect both buyers and your bottom line with HomePRO.
