How to Sell in a Buyer’s Market: The Buy Down

A client and I were brain storming this weekend about ways to make her home stand out from the crowd of homes listed for sale in San Mateo, California. I suggested that we offer more favorable terms for the buyer. With the mortgage scare and credit requirements tightening, buyers are looking for help. In my three decades of experience, I've found that one of the most effective things a home seller can do to get his or her home sold is offer more favorable purchase terms than their competitors.

A classic technique is for the seller to "buy down" a portion of the financing costs by agreeing to pay extra "points" (also called discount points) to reduce the buyer's interest rate or other financing costs on the loan. A point equals one percent of the loan amount... 2 points equals two percent of the loan amount and so on. The buy down makes it easier for the buyer to qualify for a loan because it lowers the rate of interest charged.

What is a buy down?  What are the benefits to the seller?  Buyer?  See our full post, How to Sell in a Buyer's Market: The Buy Down.