Sweeteners may sour home values

The Chicago Tribune reports:

The proliferation of incentives--from flat screen TVs and cars to six months' free mortgage payments--to lure buyers into the residential real estate market is causing a potential headache: It's beginning to blur the true selling price of homes.

Appraisers and other experts say that when the buyer of a $500,000 house agrees to the deal based on a throw-in like $15,000 in mortgage payments, the discounted true value of the home may not be apparent. So anyone who comes along later to the neighborhood and makes a bid on a comparable house based on the $500,000 figure--rather than the actual $485,000 value--may overpay.


"The [incentives] can keep the prices looking higher than they really may be," said Naperville appraiser Chip Wagner. "The seller is giving away something to the buyer, and the buyer may be getting a better deal than is being reported."

The issue is a small but significant byproduct of a real estate market that has turned downward and made many sellers feel anxious.

The National Association of Home Builders recently reported that 55 percent of U.S. home builders are offering incentives, up from 37 percent a year ago.

The practice is becoming increasingly common in the resale market. Homes for sale in the multiple listing services and ads in print and online are chock-full of offers to pay buyers' closing costs or the points on their mortgages or even a number of the mortgage payments.

Local communities have huge incentive to have artificially high real estate prices.Higher prices mean higher tax payments.You've really got to wonder what the prices are on some of these properties.