The best way to negotiate home prices and save money

Buyers can leverage new bargaining power

A year ago, homebuyers didn’t have much bargaining power. They paid more than list price, waived contingencies, and many companies got involved in a fierce bidding war. Today, however, is a different story. Recent market changes It moved the pendulum in favor of buyers, giving them room to negotiate.

What’s the best way to take advantage of this newfound power? Should buyers bargain for a lower price, or is there another way to be more cost-effective?

Mortgage expert Shivani Peterson spoke on the topic in a recent episode The Mortgage Reports PodcastHere are the strategies she recommends for today’s buyers:

Listen to Shivani on The Mortgage Reports Podcast!

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Markdowns vs. Seller Buydowns

When the number of homes sold outstrips demand, properties stay on the market longer. In this scenario, buyers often take advantage of the supply and demand mismatch by offering lower selling prices. But this is not the only way to sell your home at a high price.

According to Peterson, one of the most popular strategies at the moment is the seller’s buy-down or “seller pays points.” Here’s how it works:

Let’s say you have a house listed for $450,000. Instead of making an offer for her $440,000 (her $10,000 less than the asking price), the buyer submits an offer for the full asking price and requests a $10,000 seller credit.Then use this credit buy points‘ and lower the interest rate. Each point is his 1% of the loan amount, and the buyer’s interest rate drops by about 0.25%.

In many cases it is a win-win. the seller is lower the asking price At $10,000, the buyer receives a lower interest rate and monthly payments.

Should I buy at a lower interest rate?

Using seller credit to lower your mortgage interest rate can make a big difference in your monthly payments. You can save more money in the long run than lowering the selling price. But is it the best way to bargain when buying a home?

To answer this question, Peterson advises, you need to analyze all the data and let the numbers speak for themselves.

according to Recent forecast, Fannie Mae predicts that mortgage rates could fall below current levels in 2023. Based on this projection, does it make sense to skip the buydown and lock in lower home prices now?

Peterson thinks the question deserves consideration. Because while buyers are married to the price they pay for a home, they can always lower the interest rate by refinancing and getting a new home.

How to Evaluate Home Buying Options

When in doubt between buybacks and discounts, Peterson recommends engaging a mortgage advisor to analyze the interest savings over the forecasted horizon (e.g., 18 months) of projected refinancing opportunities .

“If a seller buy-down is more favorable in terms of interest savings over the next 18 months, get credit over lower prices and discuss with your real estate agent how best to structure the purchase agreement. recommended.”

Peterson argues that this $10,000 scenario that’s all random number. In some markets, buyers may negotiate larger seller buy-downs and save even more on a monthly basis.

Also note that there is no guarantee that you will get a lower rate next year or beyond. the house thinks so Mortgage rates will actually rise in 2023As such, you may not want to rely on low interest rates that will never come to fruition.

next step

The bottom line is to use your bargaining power to your advantage. Regardless of whether you are getting the seller’s credit for a price reduction or a better rate.

Work closely with your real estate agent and loan officer to determine which type of offer makes the most sense to you. Need to save more money now, or are you more focused on long-term costs? Having a clear goal makes it easier to create a winning buying offer for yourself.

Information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the authors and do not reflect the policies or positions of Full Beaker, its officers, parent company or affiliates.

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