As inventory levels out the supply/demand imbalance, buyers are gaining leverage in the negotiation, while sellers still have more equity than at any other point in history. The one drawback is that buyers expecting to lock their loans at the same rate they would have received two months ago are experiencing some sticker shock when realizing what their monthly payment will be now that rates have jumped. This is where you, as an awesome real estate pro, have the opportunity to bring massive value to your clients and create a win-win solution.
The North Texas MLS is currently showing around a 69% price reduction to new listing percentage. That’s a quality indicator that shows that sellers have been willing to flex on price to make deals work. This makes perfect sense as homeowners have more equity than ever before, and can therefore afford to lower price just a bit after a scorching two years. But does a small price reduction really help your buyers all that much?
Let’s face it, a $10K price reduction does do much to lower your buyer’s payment. But, what if you could give your buyer a substantially lower payment, while keeping the price at a level that the seller will agree to? Enter the seller rate buy down.
A rate buy down is when the seller agrees to pay a certain amount of money to the buyer’s lender at closing in order to lower the interest rate on the mortgage. This has an immediate and direct impact on what your buyers will owe each month, without having to budge on price one penny.
For example, let’s say your buyer is looking buy a $450,000 home. The sellers are showing a bit of flexibility and your buyers are a little worried about buying at the current rate because their monthly payment is more than they were looking to spend. You could probably offer $440K and get the deal done, however, that’s barely going to make a dent in your buyer’s monthly payment (at 20% down it would save them about $63 a month).
Rather than offer $440K, you can write the offer up at $450K with a $10,000 seller concession towards the buyer’s interest rate buy down. That would allow the buyer to buy the rate down a full point and lower their monthly payment by a whooping $227 a month!!
In this scenario the seller is netting the exact same amount of money as they would if the deal was inked at $440K, yet the buyer has a monthly payment equal to what it would be if they bought the house at $403,000! This is a true win-win scenario.
This type of creativity is exactly what separates elite from average agents. Implementing these strategies brings the kind of value to your clients that will have them sending you referrals and repeat business for life. Talk to your preferred lender to get more insight on how to present these kinds of offers to the listing agent and lock in more deals, and grow your business through excellent client service.