Before you reduce the price of 4412 Oak Street, compare these two options.
See how a price reduction compares with using those same seller dollars to lower a buyer’s mortgage rate.
Reduce the price by $20,000, and the buyer’s payment drops $104 a month. Use that same $20,000 to lower the buyer’s interest rate instead, and the payment drops $939 a month in the first year. That’s about 9 times more.
To give the buyer that same $939 a month with a price reduction alone, the seller would have to cut the price by about $181,000.
Over the first 2 years, the buyer keeps $17,047 with the lower rate, compared with $2,491 from the price cut.
- Home price
- $925,000
- Buyer’s loan
- $740,000
- Interest rate
- 6.75%
- What it costs the seller
- Nothing
- Home price
- $905,000
- Buyer’s loan
- $724,000
- Interest rate
- 6.75%
- What it costs the seller
- $20,000
- Buyer saves over the first 2 years
- $2,491
- Home price
- $925,000
- Buyer’s loan
- $740,000
- Interest rate (year 1)
- 4.75%
- What it costs the seller
- $17,047
- Buyer saves over the first 2 years
- $17,047
This costs the seller $17,047. The remaining $2,953 can go toward the buyer's closing costs.
Every dollar the seller puts in goes straight to the buyer’s payment; nothing is lost to the lender. If the buyer sells or refinances early, whatever is left in the buydown account goes toward their loan balance.
- Buyers shop by the monthly payment, not the price tag.
- A price reduction barely moves the payment. A lower rate moves it a lot.
- Both cost your seller about the same. One gives buyers a much bigger reason to write on this listing.
- Buyer agents can show their clients a payment they can afford today. That means more showings and offers that hold together.
- It gives you something new to say to your seller besides “we need to lower the price.”
- The buyer still qualifies at the full note rate, so this does not stretch anyone into a loan they can’t afford.