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Explaining a 2-1 Buy Down for Interest Rates

By
Real Estate Agent with TOUCHSTONE REAL ESTATE

Today I posted below on all of our listing in both public comments and Realtor remarks.

“With full price offer, seller is amenable to a buyer credit in order to effectuate a 2/1 rate buy down, if financed.  Specific terms to be fully negotiated between buyer and seller at the time of buyer offer.”

With interest rates where they are today we need to find creative ways to finance purchasing a home.  The experts can’t agree on whether rates are going up or down or moderating so what can Realtors and lenders do in this market?  Get creative which is what the 2-1 Buy Down is all about.  Many Realtors recommend price cuts why not find a way to make home buying more attractive in today’s market other than slashing prices.  Interest rates is one of the leading reasons people are delaying buying a home and we have a way to help overcome and maybe give relief for a period of time. 

The 2-1 Buy Down works like this the seller instead of cutting the selling price offers a two-year reduced interest rate by paying the lender money which is kept in an escrow account held by the lender.  For the first 12 months, the interest rate is 2% lower than current rate, the second 12 months the interest rate is 1% lower.  Depending on the size of the mortgage it could be a $400 or more monthly savings for the byer.  Each month the amount needed to cover the difference between the lower rate and actual rate is drawn from the escrow account.

Advantages we have many, as a seller your property stands out with a the 2-1 Buy Down also instead of your listing agent asking you to lower the price you ask them to advertise the Buy Down which many times is less than a price reduction.  As a buyer, there is no prepayment if the interest rates drop you can refinance at any time and the balance left in the escrow account is applied to your loan balance.

Thinking of buying?  Let The Betts Team help you by representing you and making an offer including the 2-1 Buy Down.  Thinking of selling?  Again, let us help you rather than just reducing the price on your home offer the 2-1 Buy Down for a full price offer.  Want to discuss this approach more?  Call me, I would be glad to answer questions and explain in detail!

Dick Betts, REALTOR®

The Betts Team

Touchstone Real Estate

The Villages, Florida

717-860-3107 cell

Dick@DickBetts.com

Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

Good morning Dick. Although not a fan of a 2-1 buy down it is a tool in the tool box. Enjoy your day.

Dec 01, 2022 04:53 AM
Dick Betts
TOUCHSTONE REAL ESTATE - The Villages, FL
REALTOR® The Villages, Florida

Wayne Martin I respect you opinion, why do you not like the 2-1?  Teach me oh wise one!

Dec 01, 2022 04:56 AM
Kat Palmiotti
eXp Commercial, Referral Divison - Kalispell, MT
Helping your Montana dreams take root

This is a good description that everyone (buyers/sellers) can understand! Good post!

Dec 01, 2022 05:16 AM
Dick Betts
TOUCHSTONE REAL ESTATE - The Villages, FL
REALTOR® The Villages, Florida

Kat Palmiotti thanks, also mark your calendar I am back on Tuesday 12/13 for another Zoom. Debe contacted me yesterday.  I will try and behave!

Dec 01, 2022 05:21 AM
Kat Palmiotti

Behaving is optional, Dick Betts - haha

Dec 01, 2022 05:38 AM
Bill Salvatore - East Valley
Arizona Elite Properties - Chandler, AZ
Realtor - 602-999-0952 / em: golfArizona@cox.net

This is an excellent post with great information. Thanks for sharing it. 

Have a super fantastic week! Bill Salvatore with AEP

Dec 01, 2022 05:56 AM
Dick Betts
TOUCHSTONE REAL ESTATE - The Villages, FL
REALTOR® The Villages, Florida

Thanks Bill Salvatore - East Valley you have a great week as well!  

Dec 01, 2022 06:44 AM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning Dick,

Love your clear and easy to understand the 2-1 Buyer program! The important point many forget to explain is:  As a buyer, there is no prepayment if the interest rates drop you can refinance at any time and the balance left in the escrow account is applied to your loan balance. That is a real plus!

Dec 01, 2022 06:50 AM
Will Hamm
Hamm Homes - Aurora, CO
"Where There's a Will, There's a Way!"

Hello Dick I like your blog that you share with us today in the Rain.  Make it a great day!

 

Dec 01, 2022 07:23 AM
Dick Betts
TOUCHSTONE REAL ESTATE - The Villages, FL
REALTOR® The Villages, Florida

Dorie Dillard Austin TX here is another fact so many miss, I work with a lot of investors, if a buyer pays down points not deductible, if the seller pays down points it can be entered as a sales expense item lowering capital gains.  So all closing cost plus however much it cost for the 2-1 program.

Dec 01, 2022 11:10 AM
Dick Betts
TOUCHSTONE REAL ESTATE - The Villages, FL
REALTOR® The Villages, Florida

Thanks Will Hamm hope you have a great day out there in beautiful Colorado 

Dec 01, 2022 11:26 AM