Price Reduction Vs Seller Credits

In slower markets, sellers may be considering lowering their list price. Alternatively sellers could credit the buyer money to help them with closing costs. There are benefits to either, however one has a bigger impact on buyers and can help unstick a home that isn’t selling.

What is causing homes to sit longer?

High interest rates are pushing expected monthly payments up for homebuyers. Most people buy off of their monthly payment rather than purchase price. When rates are high it eliminates the amount of buyers who could buy the property or are willing to have a high monthly cost of homeownership. Less demand leads to homes sitting on the market longer. One way to sell a home quicker is to solve the monthly payment problem for homebuyers. Temporary rate buydowns are a great way to accomplish this. See my previous article on temporary rate buydowns HERE.

Why offer seller credits rather than reducing the listing price?

Seller credits open up the possibilities for more buyers. A temporary rate buydown can offer big monthly savings for a homebuyer over the first few years. Buyers will pay thousands of dollars less in monthly payments with a seller credited temporary rate buydown. A price reduction on the other hand will only save buyers hundreds of dollars opposed to thousands. The best part for sellers is that a seller credit works out the same as a price reduction. They both lead to the same amount of sale proceeds. (Ex: $10k in seller credits or $10k price reduction = same sale proceeds for seller)