Considering a Price Reduction? There May Be Another Way
If you have been trying to sell your home for a while now and have received no offers, your agent is probably asking you to consider a price reduction. While this is one way to attract a wider selection of buyers to your home, you may also want to consider offering what is called a seller buy down.
What is a Seller Buy Down?
A seller buy down is when the seller offers to pay points, which is a fancy word for upfront mortgage interest, to buy down, or lower the mortgage interest rate for the borrower. Buying down the interest rate will have a much greater impact on the borrower’s monthly payment than a price reduction.
How Will a Buy Down Impact the Borrower’s Monthly Payment More?
Let’s take a look at an example. Say your home is on the market for $780,000 and you’re considering lowering the price by $20,000. Instead, you consider offering to buy down the interest rate for the borrower and you apply that same $20,000 to a rate buy down. By buying down the rate, you can save the buyer $433 compared to the traditional model. This loan only requires $87,356 income to qualify. By reducing the price of the home by $20,000, you only save your buyer $95/month. This loan requires $94,272 income to qualify. With an interest rate buy down, more buyers are able to afford your home, thus more chances to sell your home.
Considering Selling Your Home in this Buyer’s Market?
If you are considering selling your home in this buyer’s market, an interest rate buy down should be one of the techniques you use to competitively market your home. Call or email me today and I can explain how this program works with your situation. Working together, we can get your home sold fast.
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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.
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