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  • Writer's pictureRich Gribbon

Creative Financing

The number of sales is down 20% compared to this time last year. The main reason is that higher interest rates have made homes less affordable. The current 30 year fixed rate mortgage is about 7.25%. A year ago, the interest rate was about 5.5% and two years ago it was about 3.25%. A recent study found that 71% of would be buyers say that they won't look to buy a home until interest rates get back in the 5's. It's hard to say if or when interest rates will be in the 5's, but there are creative financing options that a seller can offer in order to help a buyer lock an interest rate in the 5's.

Mortgage rate buy downs are becoming more popular and in some cases are the driving force behind a sale. If a seller pays 3 or 4 points to buy down the rate, a buyer could lock in a roughly 5.75% 30 year fixed rate (depending on the rate at the time). A seller would be motivated to pay down a buyer's interest rate because it could help sell their home and could actually save the seller money. For example - a seller who is considering reducing their price by $50,000 may be better off paying $25,000 towards discount points so that a buyer can get a rate in the 5's. In this example, the seller saves $25,000 and the buyer saves over $500 per month on their mortgage payment. The old adage in the real estate business is that, "Buyers don't care as much about the price as they care about their payment."

For Buyers who have been sitting on the sidelines, call me to discuss how Seller paid discount points could get you back in the game.

For Sellers who are hesitant because you've heard the market has slowed, call me to discuss how we can use this strategy to your advantage.

As always, I appreciate your business and your referrals. I hope you have been enjoying the end of summer.

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