Conventional wisdom has always been, that if a house doesn't sell, you lower the price but what if I told you there's a better way that helps both home buyers and sellers? It's called the Seller Buy-Down Strategy.
Instead of lowering the sales price, which does almost nothing to help the buyer, you keep the price higher then take the reduction you would normally do and give that back to the buyer in the form of cash to Buy-Down the Buyer's Interest Rate. This keeps comps higher which helps future buyers and sellers as well as lowers the buyer's lower overall payments or the cash to close.
Let's look at 2 case studies. (see chart)
Scenario 1: Lower the List Price (See Orange Column) In the case below, the seller originally listed their home for $450,000. It wasn't selling so conventional wisdom is to drop the sales price. The seller agreed to drop the price by $10K. This saves a buyer $58 a month in the monthly payment.
Scenario 2: Seller Buy-Down Strategy (See Green Column) The Seller Buy-Down Strategy would be to keep the price at $450,000 and offer to pay $10K to the buyers to Buy-Down their rate. Two things happen. One they come into the closing with $1,000 fewer funds and two it drops their payment by $135 a month which is equal to you lowering the purchase price down to $426,500 and the buyer obtaining a new home loan of $405,500, or a reduction of $23,500 in the purchase price. Furthermore, the buyer is able to save $31,304 in interest and MI paid over 15 years.
The Seller Buy-Down Strategy is a Win-Win for everyone. Contact me and we can discuss ways how to educate your sellers on this.
We've been helping customers afford the home of their dreams for many years and we love what we do.
Company NMLS: 164497
1209 Nevada Street, Suite 200
Redlands, California 92374