How to Move Stale Listings Without a Price Cut: Try a Mortgage Buy-Down!
In today’s real estate market, homes are sitting longer, and days on market are climbing. Many properties are just not selling as quickly as they used to, and it’s becoming common for sellers to resort to price reductions. But here’s the thing: price cuts aren’t the only solution.
If you’re a mortgage loan officer or real estate agent, there’s a creative, alternative strategy that could help make your listings more attractive without dropping the price—the mortgage buy-down. This approach not only saves the seller money but also grabs the attention of potential buyers. Let’s dive into how this works and why it could be a game-changer for your listings.
Understanding the Mortgage Buy-Down: A New Way to Make Listings Stand Out
A mortgage buy-down allows sellers to contribute funds to lower a buyer's mortgage interest rate, usually just for the first few years. This can make the monthly payments more affordable upfront, appealing to buyers who are watching their budgets closely.
There are two types of buy-downs you can leverage:
Temporary Buy-Down: For example, a 2-1 buy-down lowers the interest rate by 2% in the first year and by 1% in the second year. After that, the rate returns to the market level.
Permanent Buy-Down: Here, the seller funds a rate that stays lower for the loan's entire duration.
For most properties in today’s market, a temporary buy-down often makes the most sense. It’s especially useful in neighborhoods with multiple similar listings competing for buyers’ attention. Instead of reducing the list price by $15,000 to $30,000, which cuts directly into the seller’s bottom line, offering a buy-down can create a competitive edge that boosts interest and drives more showings.
Why a Temporary Buy-Down Could Work Better Than a Price Cut
Let’s imagine you’re trying to sell a home in a neighborhood with five or six other listings, all sitting unsold. The typical approach would be to lower the asking price, hoping to attract buyers who might feel it's a bargain. But price cuts have limitations—they can even raise red flags for buyers who wonder what’s wrong with the property.
Instead, with a temporary buy-down, you can advertise the property with a unique value proposition: “Enjoy a mortgage rate 2% lower than the market for the first year!” This approach is more enticing to buyers and offers them real monthly savings without impacting the home’s perceived value. Buyers get the benefit of reduced payments for a period, and sellers avoid the sting of a deep discount.
How a Buy-Down Strategy Could Help You Drive More Showings and Offers
The key to using a buy-down strategy effectively is in the marketing. Imagine promoting a listing with a "2% lower rate for the first year" message—it’s eye-catching and offers a clear financial benefit to potential buyers. This strategy:
Makes your listing stand out in neighborhoods with high inventory.
Draws in more showings by appealing to buyers who want an initial cushion on their payments.
Boosts buyer confidence as the home’s value isn’t cut by drastic price reductions.
Adds flexibility by allowing the buyer to ease into their full payment over time.
A Tip for Mortgage Loan Officers and Agents: Try This Before the Next Price Reduction
Before suggesting a price reduction, consider discussing a mortgage buy-down with your clients. Show them the potential of this strategy to generate interest in a competitive market. It’s a tool that helps you position your listings more attractively, giving buyers a reason to choose your property over others without sacrificing value.