“Seller-paid points” are where you pay points to reduce the interest rate on the buyer’s mortgage. One point = 1% of the loan amount paid upfront to the buyer’s mortgage lender at the closing, in exchange for a lower interest rate on the buyer’s mortgage.
Consider a home where the list price is $300,000 and you are willing to accept a bottom line of $291,000. You would need to reduce the price by $9,000. However, what if you take that $9,000 and apply it toward paying points on the buyer’s mortgage instead of reducing your list price? You’d still walk away with a net of $291,000. However, there are three extra benefits to you in this scenario.
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Paying points on behalf of the buyer can have almost 3 times the impact on the buyer’s purchasing power vs. reducing your list price. This is because most buyers use mortgage financing. The buyer’s mortgage interest rate would likely be 0.5% – 0.75% lower if you use the $9,000 to pay points on his\/her behalf. In our example, you’d have to reduce the price of your $300,000 home to approx. $280,000 in order to achieve the same monthly payment for the buyer. This means your $9,000 in seller-paid points would end up having a $20,000 impact on the buyer’s purchasing power and make your home more affordable to a wider pool of buyers.
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If you pay points on the behalf of the buyer, the buyer would walk away with:<\/p>\n\n\n\n
These two things make it easier for the buyer to qualify for a mortgage. The benefit to you is that you have less risk of the deal falling through because you’re making it easier for the buyer to qualify for financing.<\/p>\n\n\n\n
Seller-paid points save you the aggravation and financial loss of having to significantly reduce your list price in order to compete with other homes that may be listed for a lower price. In our example with the $300,000 list price, you’d need to take a $20,000 hit to compete with homes in the $280,000 price range. On the other hand, with seller paid points, you’d only need to take a $9,000 hit to compete with homes in the $280,000 price range. <\/p>\n\n\n\n
So there you have it! Let me know if you’d like for me to run some numbers to see the impact that seller-paid points might make in your situation.
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Source: CMPS Institute<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" “Seller-paid points” are where you pay points to reduce the interest rate on the buyer’s mortgage. One point = 1% of the loan amount paid upfront to the buyer’s mortgage lender at the closing, in exchange for a lower interest rate on the buyer’s mortgage. Consider a home where the list price is $300,000 and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-504","post","type-post","status-publish","format-standard","hentry","category-prime-tips"],"_links":{"self":[{"href":"https:\/\/tips.house\/en\/wp-json\/wp\/v2\/posts\/504"}],"collection":[{"href":"https:\/\/tips.house\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tips.house\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tips.house\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/tips.house\/en\/wp-json\/wp\/v2\/comments?post=504"}],"version-history":[{"count":2,"href":"https:\/\/tips.house\/en\/wp-json\/wp\/v2\/posts\/504\/revisions"}],"predecessor-version":[{"id":506,"href":"https:\/\/tips.house\/en\/wp-json\/wp\/v2\/posts\/504\/revisions\/506"}],"wp:attachment":[{"href":"https:\/\/tips.house\/en\/wp-json\/wp\/v2\/media?parent=504"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tips.house\/en\/wp-json\/wp\/v2\/categories?post=504"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tips.house\/en\/wp-json\/wp\/v2\/tags?post=504"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}