Individuals buying new homes in Newton would receive a $4,000 check at closing under a proposal from local real estate agents and developers.

Individuals buying new homes in Newton would receive a $4,000 check at closing under a proposal from local real estate agents and developers.

Gary Hill, local real estate agent, presented city commissioners with a plan at the regular meeting Tuesday night to provide an incentive of $4,000 for any new home purchase that closes before the end of the year. Of that, the city, the developer, the builder and the real estate agent marketing the property each would pay $1,000. Hill said the Newton Area Chamber of Commerce has expressed a desire to help market such an incentive if it were to be implemented.

All expenses would be on the marketing side, Hill said, and an outside real estate working on behalf of a buyer would not pay any of the incentive money.

The commission took no action but directed staff to work on putting the proposal in resolution form for discussion at the June 9 meeting.

Hill said in the presentation new home sales are off by about 15 units for the first quarter of this year, with about 21 new homes on the market. He said new building permits are down to 10 this year through April, compared to 16 for the same time frame last year.

He said the city could put a cap on the amount of incentive funds to spend, and he said it would be “extremely optimistic” to think all 21 homes on the market would be sold by the end of the year.

Hill mentioned other cities engaging in similar incentives, including Park City, which implemented a $3,500 incentive, with the city paying $500 of it.

He said Park City has not seen the decline in new home sales Newton has. But Park City also has a rural development 100-percent loan option as well.

And Commissioner Kevin Pouch noted the reasons people might move to Newton versus the reasons people might move to Park City could be very different, and it may not be a fair comparison. He asked if there were any statistics on what made those who moved to Park City move there, and whether the incentive had anything to do with the decision.

Hill said he did not have numbers or statistics, but he said with the proposal, if it doesn’t work, the city won’t be out any money, because if houses don’t sell, there will be no homebuyers to issue checks to.

While builders could simply lower the price of homes, he said it hurt other homes in terms of value and makes it difficult to raise the prices back to profitable levels when the economy and markets get better.

By reducing the purchase price by $4,000, it could reduce a mortgage by $25 a month.

But this money could help make the initial transition into the home easier on the pocketbook as Hill said buyers would receive the incentive money at closing, enabling them to use it for closing costs and down payment on a home.

He said down payment can be an obstacle for homebuyers as they face the possibility of draining their savings to pay the down payment.

But some on the commission questioned whether those who cannot make a down payment should be purchasing the home in the first place.

Another issue was property tax, as Hill said the city would recoup the incentive money via property tax revenue in just a couple of years, on average.

But staff pointed out with a home already built, the city is collecting property taxes from the builder.

However, Hill said without positive activity and with lots of unsold inventory, builders and developers are not going to keep building and developing, hurting the chances for future growth and development — meaning less property tax revenue in the long run. And if people are moving into Newton, it could boost sales tax and school enrollment, among other factors. Hill said the move also could free up existing homes in the market.

Commissioner Jim Nickel expressed concern a slowing in new home sales could hurt positive relationships the city has worked hard to develop with builders. He said in the long run, it might be worth it to maintain good relationships with good builders.

Pouch expressed concern people taking advantage of the incentive might not fully be invested in the community and may only stay a short time. Hill said the average homeowner moves every seven years, and people are unlikely to move a year or two later because it would cost them money in terms of closing costs.

While there was discussion about putting restrictions on the incentive, such as having to live in the home for three years, city attorney Bob Myers said it can be difficult for the city to recoup the costs if someone chooses to violate the stipulations.