The One Home Buyer Incentive You’re Probably Overlooking (and Undervaluing)

The One Home Buyer Incentive You’re Probably Overlooking (and Undervaluing)

While we’re far from the housing market heyday of 2021 and 2022, things are looking up so far in 2024. Mortgage rates are starting to tick below 7%. Builder sentiment is steadily climbing as inflation continues to fall.

The one thing not moving much is home prices.

Sam Khater, chief economist at Freddie Mac, reported prices will likely continue increasing “at a steady pace.”

Paired with still-high interest rates, those prices have would-be home buyers hesitant to reenter the market. As a result, builders are boosting sales through buyer incentives.

Heading into 2024, incentives as a percentage of sales price hit a whopping 4%, nearly double the usual amount. Many builders are kicking in between $16,000 and $30,000 on a median-priced home—a big hit to the bottom line.

So, are huge price reductions and mortgage buydowns a builder’s only option until the market rebounds? Considering that might not be until late 2024, or even into 2025, builders need other options.

Now is the perfect time to add an often overlooked and undervalued incentive to your arsenal in the war for buyers: a systems and appliance warranty.

The Warranty Wow Factor

A standard systems and appliance warranty from PWSC costs builders $450 per year. Consider the outsized ROI of adding a second year (or more) of coverage to the standard one-year warranty:

  • $450 provides $7,500 of coverage, an annualized return of nearly 1600%. Builders can use this protection amount to lower how much they offer in buydowns and price reductions without decreasing the overall financial incentive package for buyers.
  • Think those brand-new systems and appliances won’t malfunction? Think again. Research from Allstate shows 33% break within two years at an average cost of $713 each. The warranty price beats the cost of a single repair.
  • The peace of mind provided to buyers by a warranty is a competitive differentiator. Warranties help boost a builder’s reputation by eliminating many of the out-of-pocket costs that hit buyers when they are most financially vulnerable following a home purchase. Warranties make repairing or replacing systems and appliances convenient and quick. The claims process removes the need for negotiating with contractors or making self-repairs. Homeowners submit the claim to the warranty provider, which arranges for a qualified service contractor to diagnose and repair the problem. No extra effort from builders or buyers required.

Consider this: research shows customers will share a positive experience with six or more people while unhappy ones share a negative experience with 15-plus people. Offering a warranty doesn’t just help close a sale today, it generates future buyers through word-of-mouth marketing.

  • According to the National Association of Realtors, 45% of people purchased a newly constructed home to avoid renovations and maintenance. Yet research shows that for 35% of new construction home buyers, premature maintenance is one of the biggest regrets. A systems and appliance warranty helps eliminate many of the headaches and hardships created by unexpected maintenance problems.
  • Systems and appliance warranties can also enhance the resale value of a home. Potential buyers may be attracted to a home with the added assurance of warranty coverage helping homeowners achieve a quicker sale and higher price when they decide to make their next move. The return on the warranty may offer a greater financial upside than a multi-year mortgage rate buydown 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 plus normal wear and tear. Additional benefits include food loss, power surges, utility add-on protection, and the ability to lock in an annual rate for five years. PWSC offers an innovative approach to sales incentives that benefit builders while addressing one of buyer’s biggest fears: unanticipated maintenance costs.

Protect both buyers and your bottom line with HomePRO.


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