Recap · Lunch & Learn
Before you cut the price.
Buyers aren't scared of the price. They're scared of the payment. Notes from Friday's Lunch & Learn with Doug Santos of Northpoint Mortgage on buydowns, seller credits and the limits every agent should know.
01The Market
Concessions on almost every deal.
Two years ago, multiple offers were normal. Now almost every listing involves a concession, and homes that already sat once get picked apart. The fix usually isn't a bigger price cut. It's a smaller monthly payment.
Watch the 10-year
The 10-year Treasury yield is the best early signal of where mortgage rates are heading.
Talk payment
Show buyers what a credit does to their monthly number, not just the price.
Call the lender first
Run the numbers before you negotiate, so you know what's actually allowed.
02The Tool
How a temporary buydown works.
- 2-1 buydown: the rate is 2 points lower in year one and 1 point lower in year two, then the full rate from year three.
- 3-2-1 buydown: the same idea, starting 3 points lower and stepping up over three years.
- Where the money goes: the seller's credit sits in an account that covers the difference each month. If the buyer refinances early, what's left goes toward the loan balance.
Rule of thumb from Doug: a 2-1 buydown runs about 2% of the price. Every loan is different, so get the real number from the lender.
03The Limits
Know the ceiling.
How much a seller can contribute depends on the loan and the down payment. For a primary residence:
Conventional, under 10% down
Up to 3% of the price.
Conventional, 10% to under 25% down
Up to 6%.
Conventional, 25% or more down
Up to 9%.
FHA
Up to 6%, whatever the down payment.
Credits can cover closing costs, a buydown, or both, but never more than the actual costs.
04The Move
Take the credit, not the cut.
Temporary buydown
Lower payments for the first years. Fits a buyer who expects to refinance if rates come down.
Permanent buydown
Points paid up front lower the rate for the life of the loan. Wasted money if the buyer refinances soon.
With enough credit, you can combine them: some toward a temporary buydown, the rest toward points or closing costs. Tell both agents exactly what the credit is for, so nobody is negotiating blind.
05Also On The Table
Three more worth knowing.
Assumable loans
FHA, VA and USDA loans can be assumed. The catch: the buyer needs cash to cover the seller's equity.
Hold the good ones
A client tired of being a landlord may not need to sell a great rental. Property management can take the work off their plate.
Fast pre-approvals
A fully underwritten pre-approval can make a two week close possible. Keep the documents current.
06Before Your Next Negotiation
Do the math first.
- Ask your lender for a side by side: price cut versus seller credit, for the same buyer.
- Memorize the concession limits above.
- On your next listing that's sitting, market the credit, not just the price.
General education, not a loan offer or approval. Guidelines change and every loan is different. Confirm with a licensed loan officer.
Next Lunch & Learn
Lunch, one useful topic, good people.
In person in Danvers, hosted by Doug Santos of Northpoint Mortgage.
Friday, November 13 · 12:00 PM · Danvers, MA
Follow @theloopre or DM us on Instagram
Free. Open to every brokerage.
Received
Meanwhile, follow along on Instagram at @theloopre.