• MARKETWATCH • JUNE 14, 2009

Reel In First-Time Home Buyers •

By AMY HOAK

A federal tax credit of up to $8,000 is nudging many Americans into buying a home for the first time, good news for those trying to sell one.

Still, selling a home isn't easy in most markets today. To get the typical first-time buyer to bite and submit an offer, a house has to stand apart from the competition -- and there's a lot of it, including foreclosure homes that are selling at hefty discounts.

One big thing working in favor of the traditional seller: A lived-in, maintained home is easier for buyers to imagine themselves living in than a vacant foreclosure. That has great appeal for someone buying a home for the first time, for practical and financial reasons.

"First-time buyers are skeptical of buying homes that need improvement," says Eric Mangan, a spokesman for ForSaleByOwner.com. "Sellers certainly don't need to remodel the kitchen, but they want to make sure that their homes showcase very well."

Andy Rash

While nearly half of brokers polled for a Coldwell Banker survey last year found that affordability was the No. 1 concern for first-time buyers, fully 81% said move-in conditions were very important to these buyers.

Only 7% said first-time buyers were looking to purchase fixer-upper homes that they could buy on the cheap and renovate.

Those feelings might be even stronger today as lenders generally require larger down payments, unless the mortgage is backed by the Federal Housing Administration. Higher down payments mean buyers have less cash left over for improvements, says Leslee MacKenzie, of Coldwell Banker Hickok & Boardman Realty in Burlington, Vt.

"They're doing what they can to save for the down payment," she says, and that will deplete some of the funds buyers would have for repairs.

While foreclosures that are in severe disrepair can be a huge turnoff for a first-time buyer, some banks will make improvements to their foreclosed properties, fixing them up so that they meet FHA standards and a buyer's needs, says Chuck Whitehead, of Coldwell Banker Associated Brokers in Southern California. These fixed-up, bank-owned homes can be stiff competition for the rest of the for-sale inventory.

Never fear, there are still ways to outshine other homes on the market. Assuming you've priced the home correctly, here are five ways to lure a first-time buyer:

Maintain and stage

A home that has been taken care of throughout the years will offer a stark contrast to a vacant, empty foreclosure.

"If someone is living there, the landscaping is not dead," says Mr. Whitehead. "There is warmth in the home," and that can go a long way in selling a property.

As with any home, a fresh coat of paint, decluttering and the removal of unpleasant odors can go a long way to making a good first impression. But be careful not to over-improve the home; the investment might not be worth the cost.

Offer help with closing costs

And offer early. Whether you put it up front in the marketing material or in the listing, this could be an extra motivator to reel in a buyer.

Generally, there's a good chance buyers will ask for help with closing costs anyway, but it might help to offer it at the beginning, says Heather Joubran, an agent with Re/Max Central Realty in Lake Mary, Fla.

If rising mortgage rates have your buyer spooked, consider paying the points to bring the interest rate down, says Mr. Mangan. But consider a buyer's timeline for staying in the home before deciding if this is the most effective way to help; paying points generally makes sense for those staying in a home for more than a few years.

Offer a home warranty

First-time buyers are often coming from a rental, and they are used to calling a landlord when there's a problem. To help them more easily transition into homeownership, provide them with a warranty that covers major systems, Ms. Joubran suggests.

Offer mortgage protection

In some cases, it might make sense to address buyers' fears by purchasing insurance for them, so they can keep up with their mortgage even after a job loss. Coldwell Banker has such a program through its parent company, Realogy.

The plan will make several months of mortgage payments in the event the buyer becomes unemployed.

"There are people with secure jobs who are still nervous," says Ms. MacKenzie. "This can give them just a little more comfort."

Don't snub low offers

Buyers know prices have fallen, so they're being aggressive in their offers -- sometimes extremely aggressive. But even if they come in with a shocking lowball offer, don't scoff at it. Understand where they're coming from. Try to compromise.

"My rule of thumb is every offer deserves a counteroffer," says Ms. Joubran. "At least counter them back. It gets the conversation going."

If they liked the home enough to make an offer, maybe you can arrive at a mutually acceptable price, she says.

Write to Amy Hoak at amy.hoak@dowjones.com