Your House Isn’t Selling… Now what?
In the Palo Alto, Menlo Park, Los Altos and Los Altos Hills real estate markets, every move matters —and when it comes to selling your home, price reductions are often the go-to strategy when the Days-On-Market start to creep up. But before you cut the price, there’s another tool to seriously consider.
Enter: the seller-paid mortgage rate buydown.
Before I dive deep into this topic. I’d strongly suggest revisiting your original listing price with your agent. If you set a moon shot price, that isn’t in line with recent sales and listing comps, that could inform the move you make around any buyer concessions.
What Is A Seller Buydown?
A mortgage rate buydown is when the seller offers to pay part of the buyer’s mortgage interest up front. This results in lower monthly payments for the buyer, especially in the first few years of the loan—or even permanently, depending on the structure.
Instead of reducing the home’s price by, say, $20,000, a seller can spend a fraction of that—perhaps $10,000 or less—to buy down the rate. The buyer ends up with a more affordable monthly payment, and the seller nets more than they would with a price cut. Win-win.
Types of Buydowns
There are different structures, such as:
- Temporary buydowns like a 2-1 buydown, where the rate is reduced by 2% the first year, 1% the second, and returns to normal in year three.
- Permanent buydowns where you pay points upfront to permanently reduce the interest rate.
Lenders often allow seller credits to be used for buydowns, making it a flexible and creative option to get your home sold.
Why It’s a Smart Move
- Stands out in a competitive market
With most buyers focused on rates, offering a buydown incentive could be more appealing than a simple price cut. - Cost-effective
Often, the cost of a buydown is less than the amount sellers would need to knock off the list price to see the same impact. - Boosts buyer confidence
In a high-rate environment, easing the financial burden upfront can make buyers feel more secure and ready to commit.
Final Thoughts
True, a seller buydown is a lesser-known option but it is still a viable strategic tool to make your property stand-out. And, it just might be the bold move that helps you make your next move!
https://money.usnews.com/loans/mortgages/articles/a-guide-to-seller-paid-mortgage-rate-buydowns#:~:text=A%20seller%2Dpaid%20rate%20buydown,to%20reduce%20the%20home%20price.
Opinions and views are my own. The content in this post is for informational purposes only. Do not rely on this information for financial and/ or legal advice or to make any decisions about your financial and/or legal situation. Seek professional counsel for your specific needs.