Untitled_03052018_140648********Updated….as in….BIG TIME UPDATE!!!!!********
–As of today, March 1st 2018, the program I describe below has been updated to include now all qualified Caterpillar relocation homes priced selling at $200,000 and above (it used to be $300, 000 and above) will now be eligible for a trade in option if you have a home to sell. All other benefits such as the 3% buyer incentive, the $3500 moving expense credit and the all selling expenses paid benefit will continue. The price diferentional is changing from 25% to 35%, meaning the value of the house you are buying must be at least 35% greater than the value of the house you are trading in. I will make those changes to the article below as well.
There’s a lot of buzz out there right now regarding some buyer incentives that are being offered on some corporate relocation homes, but there’s also a lot of questions about them, so we’re here to help explain what they are and the process of finding them.
For the purpose of this post, we’ll focus specifically on the incentives that are being offered by Caterpillar. There are other corporate homes out there, but let’s save that for another post.
WHAT QUALIFIES AS A “CATERPILLAR HOME”?
In most, but not all, cases, this involves a work related relocation of a Caterpillar employee out of the central Illinois area. There are two stages of this move.
- When a Caterpillar employee is being relocated, they are tasked with putting their home up for sale. From the time he lists the house, there is time period where the seller is responsible for negotiating the offers made on his home.
- If the seller is unable to sell the home during this time period, the sellers relocation company may step in and take over ownership of the home so that the employee can be relocated to their new place of employment. When this happens, the house is still listed for sale, however any offers made during this time are decided not by the original owner, but rather by the relocation company/employer.
There are instances where an employee may be relocated and either not have the option, or may make their own decision, to not be part of the typical relocation process, in which case their home may not be in the relocation program. Be sure to confirm with your Realtor which homes are actually in the program, known officially at the Market Sustainability Program (MSP).
WHAT ARE SOME OF THE INCENTIVES THAT ARE BEING OFFERED TO BUYERS OF THESE HOMES?
One of the first incentives that is being offered is a 3% Buyer Incentive based on the selling price of the home. The 3% can be used by the buyer to offset typical closing costs (subject to lender approval). Some typical closing costs include appraisals, inspections, interest rate buydowns and private mortgage insurance payments. But it doesn’t stop there. The 3% can also go towards improvements to the house such as new carpeting, paint, light fixtures, yard maintenance, landscaping, new appliances….the list is almost unlimited. The only provision is that the 3% is paid directly to the vendor providing the work. The check made payable to the vendor is provided to the buyer at the time of closing. The 3% cannot be rebated directly to the buyer (unless it is a cash purchase with no financing).
So, for example, say you picked out some appliances, furniture, carpeting and lighting items you would like to use the 3% towards. Just get a written estimate (it must be in writing) ahead of time, prior to the closing, and submit that to your Realtor. They will work through the process and get those bids submitted to the relocation company. Then, the day of the closing, the buyer will get checks made payable to the vendors providing the work. It’s the buyers responsibility from that point to make arrangements for the work to be done, or purchases made, and to make payment to the vendors.
WHAT IF I HAVE A HOUSE TO SELL FIRST BEFORE I CAN CLOSE ON A “CATERPILLAR HOME”? CAN I TRADE MY HOME IN?
There is an option available also that gives a buyer of a qualifying home an option to make an offer on a Caterpillar home, subject to Caterpillar buying the buyers home. There are some requirements for the home being offered as a trade in.
- The Caterpillar relocation property seeking to be bought must have a purchase price of $300,000 (UPDATED….NOW IT’S $200,000 or more)
- The Caterpillar relocation property must be a 25% (UPDATED…NOW IT’S 35%) or greater value than the home being traded in. There are minimums also.
- The buyer/community member must agree to work with Cartus Relocation (Caterpillar’s Relocation Provider).
- The home being traded in must be within 20 miles of downtown Peoria (100 NE Adams Street, Peoria)
There are additional benefits also. Aside from being able to trade in your home, you will also get an additional $3500 added to your buyout price that you can put towards moving expenses, or really anything else you would like. There are also NO seller closing costs and NO closing to attend.
WHAT IS THE PROCESS OF THIS “TRADE IN PROGRAM”? WHAT STEPS ARE INVOLVED?
It’s pretty much like any other offer process. You find a home you want that is in the Home Purchase Program. You make an offer on that home, and fill out the application related to the trade in process Market Sustainability Application . You negotiate that offer to a point of an agreement. From there, an appointment will be set up for a Realtor to view your home and work up a report for Cartus/Caterpillar to review. This process usually takes up to 2 weeks, and an offer will be made to you during this time. You can accept that offer, reject it or counter it. If you accept it, then the process moves forward with you setting up inspections and making loan application for the house you want to buy, and at the same time inspections will be set up on your own house you are trading in. The inspections on the house you are trading in are a sellers expense, while they are a buyers expense on the house you are buying. If any issues come up on either house, they get negotiated to either a point of an agreement, in which case we move towards the closing, or if no agreement, the contract is nullified. Neither party has any further obligation to the other.
It really is that great of a program. You get to trade your house in, with no seller closing costs (provided it isn’t already listed for sale, in which case that is between you and your Realtor), no appraisal on the house you are trading in, no closing to attend, and you still get 3% back on the house you are buying and a $3500 moving expense credit added to your buyout.
WHAT IS THE OFFER LIKE ON MY HOUSE I’M TRADING IN? IS IT MARKET VALUE? IS IT HALF PRICE? HOW SUCCESSFUL IS THE PROGRAM SO FAR?
The market report that the Realtor comes up with for Caterpillar/Cartus isn’t necessarily the number that you will be offered. The marketing report is confidential between only the Realtor who prepared it and Caterpillar/Cartus. Once the report is turned in, it will be reviewed and it may be revised one way or another. In the vast majority of transactions thus far, over 90% of the time, the offer being made has been agreeable to both parties, and the program has worked as it’s supposed to. Anyone considering this program I think needs to take into account that the price they are being offered for their home is taking into account that they are trading in their home-in many cases without any closing costs-while also getting 3% back towards closing costs and upgrades, plus $3500 in moving expense credits that they can really use towards anything else.
HOW LONG WILL THE PROGRAM CONTINUE?
While there isn’t an end date set it stone, it’s expected to continue through 2018, or could be shortened if it appears market conditions are favorable enough that incentives are not needed anymore.
HOW DO I GET THE LIST OF HOMES?
Just ask us! There is not a publicly available searchable site that has a list of the homes. If you give us a call or an email with the criteria you are looking for, we can set you up to get notified just as soon as a home comes into the program.
WHAT HAPPENS TO THE HOUSE BEING TRADED IN?
They become part of the Market Sustainability Program (MSP) and will be put up for sale. The qualifying home that is traded in will be put into the same program, offering the same incentives that are being offered on a “Caterpillar/Cartus” home also in the program.
HOW DOES THIS HELP SUSTAIN THE MARKET?
This has been a prickly topic, and understandably so. I’ve been involved with this from the beginning so here’s my take on it. These homes that are being offered for sale by a relocating employee are coming on the market regardless of if this program exists. The difference is that in the past many of these homes would see selling prices below the typical market prices. With the incentives that are being offered, it’s helping show a higher overall selling price (good for the market values overall) yet at the same time are offering some pretty incredible rebates/incentives to the buyer. The side effect of this is that is has also gotten many home buyers into the market that maybe wouldn’t normally be looking to upgrade because of the concern they have of selling their own house. It has also resulted in a decrease in the days on market for many of these homes, as they are selling much faster that\n they would have if the incentives were not in place.
Does this present a challenge to other non-corporate relocation sellers trying to sell? Any incentive offered by anyone can also be offered by anyone else. This is getting homes off the market quicker, and at a higher recorded selling price, than what the alternative offered.
There are some other trade in type programs being offered out there right now by individual agents, but they are essentially a scam. They either never make you a valid offer, or exclude your home for one reason or another from being traded in, or make you an offer so low, with so many selling expenses tied to it, that you would be a fool to ever really consider it. This is the only program that exists that will definitely make you an offer if your home qualifies, and what is takes for a home to qualify is very, very basic details that is inclusive of most homes out there.
To see additional information on the program, as well as review the application process, click the link Market Sustainability Application
If you have any questions about the program, or would like to get signed up for the list of homes that are in the program that meet your criteria, just give us a call or drop us an email!
Mark and Jennifer Monge
Jim Maloof Realtors