A Seller Credit Could Make All the Difference

When a listing stalls, the reflex is to cut the price. In many cases, a seller credit toward a temporary rate buydown solves the real problem better, because most buyers are not balking at the price. They are balking at the monthly payment.

A buydown uses the seller's money to lower the buyer's rate for the first few years of the loan. Here is how the three common structures compare on a $700,000 loan at a 7.5% note rate, where the full payment is $4,895 a month.

The Three Buydown Options

3-2-1 buydown. Year 1 at 4.25% ($3,443/mo), Year 2 at 5.25% ($3,867/mo), Years 3-5 at 6.25% ($4,311/mo), then 7.5% ($4,895/mo) for Years 6-30. The seller credit runs about $50,784. This gives the most upfront relief and suits buyers who expect to refinance or see their income grow.

2-1 buydown. Year 1 at 5.5% ($3,976/mo), Year 2 at 6.5% ($4,426/mo), then 7.5% ($4,895/mo) for Years 3-30. The credit is about $16,680. Year 1 saves the buyer $919 a month, a strong start for roughly a third of the 3-2-1 cost.

1-1-1 buydown. Years 1-3 at 6.5% ($4,426/mo), then 7.5% ($4,895/mo) for Years 4-30. The credit is about $16,848. The buyer saves about $469 a month for three years. It is steady and predictable, with no step-up each January.

Why This Often Beats a Price Cut

A price cut is permanent. It lowers your sale price, it shows up in the listing history, and it becomes a comp for every neighbor who sells after you. On a $700,000 loan, a modest cut barely changes the buyer's monthly payment.

A buydown aims straight at the objection buyers actually raise. In my experience, a buyer who hears "your payment starts around $3,443" reacts very differently than one who hears "we took a little off the price." The 3-2-1 is especially powerful on higher-priced homes, where payments are large enough that a lower starting rate changes whether the numbers work at all.

What to Check Before Offering One

Buydowns are not free money, and they are not for every buyer. The buyer still has to qualify, and lenders and loan programs set their own limits on seller concessions, so confirm with the buyer's lender how much credit the loan allows.

Buyers should also plan for the full payment. A refinance is possible if rates fall, but nobody can promise that. The structure should fit a buyer who can handle $4,895 a month once the buydown ends.

Bottom Line

A price cut gives away money forever and barely moves the monthly number. A targeted seller credit toward a buydown puts the same dollars where the buyer feels them most, and often gets a stalled listing moving. If you want to run payments for your own scenario, the mortgage calculator is here.

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Plato Asadov (Aflatun Asadov)
Licensed Massachusetts Real Estate Salesperson, Lic. #9579004
Brokered by Steve Bremis Realty Group. Equal Housing Opportunity.
Phone: 617-302-7222 · Email: plato@realestoria.com · realestoria.com
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This article was drafted with AI assistance from Plato's research tools and reviewed by Plato before publishing. Information deemed reliable but not guaranteed; it is general education, not advice for your specific situation.