steve's White Mountain Blog


Ever try buying down the rate to attract a buyer to a property.

When developers want to preserve the price of homes for future sales and appraisals, offering to buy down the rate is a great way to add value for the buyer.


Are any of you working with a motivated seller??   

   **** Of course you are!!!****

If we were in a large room full of realtors and I asked that question I think there would be a lot of agents raising their hands!

With the tremendous amount of inventory on the market for buyers to choose from, it’s important for sellers to get creative in order to attract buyers.  My favorite quote is, “The definition of insanity is trying the same thing over and over again and expecting different results”.  If you are sticking to the same old techniques in trying to motivate sellers, you may find your listings are not moving quite as fast as you would prefer.

I would like to offer you a different way of attracting more buyers.  Why not have your sellers offer a permanent rate buy down?  Actually, this concept is really not different at all.   This is something that sellers have always been able to do.  However, I don’t see a lot of sellers doing it!

Consider this scenario:

$250,000 selling price

Down payment of 20%

Loan amount of $200,000

Hypothetical rate on a conventional 30 yr fixed rate mortgage is 4.250% with 0 Points.

What if you could offer QUALIFIED buyers of one of your listings a 30 year fixed rate of 3.750% with 0 Points?  Well, you can!  Here’s how…

By offering a prospective buyer a seller funded, permanent rate buy down.  Here’s how it works.  Let’s say the cost to buy down the interest rate from 4.250% to 3.750% is 2 Points (2% of the loan amount = $4,000). 

Conventional lending guidelines allow a seller to pay up to 6% of a borrower’s non-recurring closing costs.  (Min. down payment must be = to 10% If less than 10%, max. contribution is 3%).  A seller could potentially offer a lower rate if they agree to pay additional points, as long as it is within the max. seller contributions of 6%. 

Before you do a price reduction, why not offer a permanent rate buy down?  The benefits of doing this are:

1)      You preserve the sales price for future comps

2)      You earn more commission since the price has not dropped

3)      The seller is happy since they were able to sell their home for more money

4)      The buyer is happy since they saved thousands of dollars in interest over the life of their loan

  At first glance the monthly savings may not look like much.  But if you look at how much a buyer could save if they applied that monthly savings to paying off the principal! The savings are staggering and the payoff of the note is complete 25% sooner.




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Comment balloon 11 commentsSteve Loynd • May 20 2011 10:02AM


In this scenario, the buyer may have paid $4,000 more for the home -if that was what the seller was willing to contribute. But it helps qualify the buyer (with a lower proposed housing expense) and in the long run will save the buyer money on interest.

Posted by Steve Loynd, 800-926-5653, White Mountains NH ( Alpine Lakes Real Estate Inc., ) about 9 years ago

Excellent idea Steve! A great way to market a property too!

Posted by Deb Espinoza, GRI, Broker, SRS,ABR ePro, SFR, CNE (Stage Presence Homes, San Diego Real Estate) about 9 years ago

I have made broker contributions  in the past in order to close the sale.

Posted by James Loftis, ( about 9 years ago

I would rather see this done than a selling agent bonus!

Posted by Laura Giannotta, Your Realtor Down the Shore! (Keller Williams Realty - Atlantic Shore ) about 9 years ago

This idea can provide another way to make the deal more attractive, and help with future appraised values in the neighborhood.

Posted by Steve Loynd, 800-926-5653, White Mountains NH ( Alpine Lakes Real Estate Inc., ) about 9 years ago

That makes good sense Steve!  Now obviously the home needs to appraise right?  I agree with Laura above.  Anything to help the buyer rather than giving out a bonus :)!

Posted by Brenda Mullen, Your San Antonio TX Real Estate Agent!! (RE/MAX Access) about 9 years ago

Brenda, yes - the house has to appraise in order for this to work, but the up-side of funding a buy down at closing is sustaining the values and having the buyer remember you for the extra effort.

Posted by Steve Loynd, 800-926-5653, White Mountains NH ( Alpine Lakes Real Estate Inc., ) about 9 years ago

Steve...Great idea.  I am working with a client that wants a house that is a bit higher in payments than he wants.  This could work.

Posted by William Feela, Realtor, Whispering Pines Realty 651-674-5999 No. (WHISPERING PINES REALTY) about 9 years ago

Bill, I hope this can give you an edge with your buyer.

Posted by Steve Loynd, 800-926-5653, White Mountains NH ( Alpine Lakes Real Estate Inc., ) about 9 years ago

Steve that is an excellent idea, and one that I have suggested to Realtors more than once, but none of them have used it.  It is a simple idea that should be considered and could be a good tool to get people in the door.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) about 9 years ago

George, I appreciate your compliments - you being a mortgage guy, you can see the value in this suggestion.

Posted by Steve Loynd, 800-926-5653, White Mountains NH ( Alpine Lakes Real Estate Inc., ) about 9 years ago