Seller-Paid Rate Buy Down for Homebuyers can be a Win-Win for both parties in the sale of a home
Daniel Arias is the team leader and founder of We Fund LA
680 E Colorado Blvd Suite 320, Pasadena, CA 91101 (818) 995-1700 https://wefundla.net/
A seller-paid rate buy down could also be called seller-paid points. Paying points or buying down the interest rate, means that the overall cost of the loan is lower. Both lower monthly payments and total interest paid for the life of the loan is a big savings for a home buyer.
Not that long ago, real estate agents, myself included, and their home sellers could command top dollar thanks to a pandemic-fueled buying frenzy.
It wasn’t unusual to hear sellers requesting that buyers waive the inspection contingency and/or loan contingency, which bound the buyer to buying regardless of repairs needed, and if the buyer couldn’t qualify for the loan they would lose their deposit.
Currently we are on a level playing ground where it isn’t quite a buyers market, nor sellers. Inventory is low so buyers don’t have a lot to chose from, and buyers are hesitant to purchase with the raised interest rates. We commonly see a homeowner who has had their property on the market for a while, with hesitant buyers who love the home, but not the current interest rates. A perfect Win-Win is for the seller to offer to buy down the buyers rate, in lieu of a price reduction to entice the buyer.
Many times a price reduction on a home sends a message to the pool of buyers that the home isn’t as desirable, even if it’s a wonderful home. It can benefit a seller to offer to help buy down the mortgage rate for an interested buyer and avoid the risk of “chasing the market down” with price reduction after price reduction. On the flip side, a buyer can submit an offer and ask for the credit towards a rate buy down, instead of a lowering the asking price.
