When a home is not getting offers, the first instinct is to lower the price. Sometimes that is the right call. But with the average 30 year mortgage rate above 7% this week, according to Freddie Mac, many buyers are shopping by monthly payment, not by list price. That changes the math on how a seller should spend money to get a deal done.
The Same Money, Two Very Different Results
Here is a side by side example using round numbers. Picture a $400,000 home and a buyer putting 10% down, with a 7% rate on a $360,000 loan. That payment is about $2,395 per month in principal and interest.
- Option one, a price cut of about $8,400. The loan drops by roughly $7,500, and the monthly payment goes down by only about $50.
- Option two, a seller funded 2-1 buydown costing about $8,400. The buyer’s payment drops by about $463 per month in year one and about $237 per month in year two, before settling at the full rate in year three.
For roughly the same money, the buydown moves the buyer’s monthly budget about nine times more in the first year. When a buyer is deciding between your home and the one down the street, that difference is what they feel.
Why a Buydown Protects Your Price
A price cut is public, and it becomes part of how buyers and appraisers view your home. A buydown does not change the sale price. It is a concession negotiated in the contract, so your home still sells at the number you agreed on. If you want the full buyer side explanation of how a 2-1 buydown works, we covered it here.
When a Price Cut Still Makes Sense
A buydown is not a fix for a home that is simply priced above the market. If showings are low and buyers are not even getting to the payment conversation, the price is usually the issue, and no incentive will change that. A buydown also depends on the buyer’s loan program, and every loan type has limits on how much a seller can contribute. It works best when your price is in line with the comps and buyers just need help making the monthly number work.
Make the Offer Visible
An incentive only works if buyers know about it. If you decide to offer a buydown, it should be part of the marketing from day one, in the listing remarks, in the materials, and in conversations with buyer agents, so buyers can see what their payment could look like before they ever schedule a showing.
Want to see which option puts more money in your pocket? Run your numbers with our net proceeds calculator, then schedule a seller consultation and we will build the strategy together.