5/05/2008

Negotiating Buydown Strategy for Sellers


Reduce the price? or Buy down the interest rate?
Here's a great buydown strategy just sent to me today:


This rate buy down strategy will help sell your listings faster and help you respond to that low ball offer. In a competitive market to get a buyer, this could be a strategy that will make you (seller or agent) shine above the rest and solidify the close of escrow.
Question: Should you reduce your sales price or should you reduce your Buyer's interest rate?
Monthly Obligation

1. Did you know that a price reduction of $20,000 on your listing will save the buyer $103.00 per month?
2. The same $20,000 in buying down the interest rate will save the buyer $541.00 per month!

Qualifying

1. Did you know a buyer of your $450,000 listing needs $96,000 in income to qualify for the loan.
2. Did you know a buyer of your reduced $439,000 listing needs $94,200 in income to qualify for the loan.
3. Did you know that if you took that same $11,000 dollar reduction and paid down the interest rate, that listing needs only $74,400 in income to qualify for the loan.
Listing Scenarios:

Listing One-Listing Price $750,000.00--DOM=120, Payment=$3,453.00.
Price Reduction to $725,000--Payment=$3338.00, DOM=130.

Listing Two-Listing Price $750,000.00 and effectively reduced with a seller interest rate buydown. (Interest Rate Buydown Cost $12,750.00 to $19,125.00) DOM-?, Payment $2,922.00 , Sold! Saving the buyer over $45,000.00 in five years.

Listing One (Reduced)-Down Payment ($108,725.00) and Loan Closing Costs ($9,000.00) = $117,750.00 at the closing table.

Listing Two - Down Payment = $112,500.00 at the closing table. Loan Cost paid by sellers.

Listing One- Income Needed- ~$98,000.00

Listing Two- Income Needed- ~$87,000.00

Listing Two, with a buy down strategy, saves the buyer over $45,000.00 in five years and over $95,000.00 in ten years.


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