Sellers have gotten very comfortable with one lever: price. Interest rates are higher and that is slowing this market down. Sellers are responding with price drops. Sometimes that does the trick, no doubt about it. But there's a second lever that gets less attention, and it can be more effective for the same amount of money — buying down the buyer's mortgage rate instead of the price of the house.
Here's the idea in plain terms. Instead of knocking, say, $16,000 off your asking price, you offer that same $16,000 as a credit toward the buyer's interest rate buydown. The house sells for more, and the buyer's monthly payment drops — more meaningfully than a simple price cut would have gotten them.
Some Options to Consider
Temporary Buy-down (the "2-1"). The buyer's rate is reduced for the first two years of the loan — typically 2% lower in year one, 1% lower in year two — then settles at the regular rate for the rest of the term. On a $765,000 loan, that can mean a payment that's roughly $950 a month lower in year one. It's a way to ease someone into homeownership at today's rates and it really represents a bet by the buyer that they'll be able to refinance at a lower rate in the future, or that they will simply be earning more by the time it steps back up... or both!
Permanent Buy-down The buyer's rate is reduced for the life of the loan. On that same loan, a $16,000 credit toward points might knock the rate down about five-eighths of a point — and save the buyer around $300 a month, every month, for as long as they hold the mortgage.
Why This Beats a Price Cut for Some Buyers
A price reduction saves a buyer money on their down payment, translating to saving a little on their monthly payment. A rate buy-down is all about lowering that monthly payment; which can put the payment in reach month after month.
The Takeaway: The same $16,000 spent as a rate buy-down instead of a price cut is likely to move more buyers to actually pull the trigger — because it solves the problem they're actually worried about.
This isn't the right move for every listing at all times, or every buyer pool, and the exact numbers depend on the loan amount, the buyer's rate, and what a lender can actually offer at the time. But it's worth having in your back pocket alongside price as a tool, particularly at a time when higher interest rates have made monthly payments seem unaffordable.
