A palatial Dallas listing comes with a pair of guest suites, formal gardens, four fireplaces and one seller-financing option meant to tempt buyers in a tepid housing market.
The 11,081-square-foot home at 5214 Royal Lane in the Preston Hollow neighborhood was listed at nearly $12 million and lowered over the weekend to about $11.5 million. Under the terms of the interest-only deal, a buyer could choose to finance $5 million for four years at 3% interest, which is well below the going rate for a jumbo mortgage.
The financing offer that would free up money for a buyer to invest elsewhere is one of a handful of incentives that sellers and agents use in hopes of winning over homebuyers when sales are soft. As more listings accumulate, buyers become selective, and prices tend to level off or decline, testing sellers' resolve.
During the U.S. housing downturn nearly two decades ago, cruises, cars and paid country club fees were common deal sweeteners. However, agents say buyers are less interested in gifts than in a good deal on the property.
The seller-financing offer is "just another example of trying to give you something instead of sending you on a trip to the Bahamas," Ken Johnson, the Walker Family Chair of Real Estate at the University of Mississippi, told Homes.com.
Traditional lenders require buyers to get homes appraised, but seller-financing deals typically don't include professional valuations, Johnson said. He recommends that a prospective buyer of the Royal Lane home obtain an appraisal to ensure the list price is close to market value.
Sellers are downsizing
"If the value is there, then this is a fantastic deal," he said.
The Royal Lane sellers are offering a rate that would easily beat the national average of 6.39% for a 30-year, fixed-rate jumbo mortgage, according to the latest data from the Mortgage Bankers Association. A jumbo mortgage is one with a loan amount, in most U.S. counties, above $806,500, as set by the Federal Housing Finance Agency.
Housing markets across Texas and other parts of the South have softened in recent months. Homes are taking longer to sell, giving buyers the kind of leverage they haven’t had since before the pandemic.
Dallas' median price for all property types was down year over year this summer but rose 1% in September to $399,900, according to Homes.com data. Austin and Houston posted annual declines of 1.5% last month, while San Antonio's median price remained flat.
Sun Belt markets were overbuilt during and after the pandemic, causing an oversupply that's now leading to price moderation, according to Erika Ludvigsen, national director of residential analytics at Homes.com. In contrast, once-struggling Midwest markets such as Detroit, St. Louis and Cleveland are posting robust price growth, according to the Homes.com data.
"The Midwest’s affordability and tight supply fueled rapid price growth," Ludvigsen said last month, "whereas oversupply of for-sale inventory in the South and stretched affordability in California pushed prices downward, creating a clear divide in housing market performance.”
Even though luxury home sales are typically all-cash transactions, the Royal Lane seller-financing offer, which would mean $12,500 monthly payments until January 2030, gives a savvy buyer flexibility, according to listing agent Tiffany Touchstone Hawkins of Douglas Elliman. She co-lists the property with her husband, Brandon Hawkins.
She said prospective buyers are intrigued.
"They pause, they go, 'Oh, that's something to consider,'" Touchstone Hawkins told Homes.com.
The three-bedroom main home, with a limestone facade, has a theater room with stadium seating, a 1,000-bottle wine cellar, a pool, two full bars, loggias, and covered parking for seven cars, according to the listing. The estate is gated and not visible from the road, ensuring privacy, the agents said.
Dallas-based custom builder Sharif and Munir built the home in 2017. At the seller's request, architect Lloyd Lumpkins designed it after the St. Regis Rome, a five-star luxury hotel in Italy. The sellers are the original owners who are now downsizing to East Texas, according to Brandon Hawkins.
"I think it's reasonable to expect a 7 to 9% return on investment, and you'd be borrowing at 3%," he said in an interview. "I think that makes financial sense to most people."