Don't Negotiate the Purchase Price with the Seller
Negotiate the Rate
Don’t negotiate the purchase price with a seller. Negotiate the rate with the seller.
Did you know that your interest rate can have a bigger impact on your monthly payment and ultimately your cost of home ownership than home price negotiations? So why is everyone still negotiating the home price? Traditionally buyers want to negotiate price with a seller but if they negotiated the cost of borrowing with a seller, they can save $10’s of Thousands of dollars. Even $100’s of Thousands of dollars! Here’s what I mean: Say a house is up for sale at $800,000.00 a buyer with a credit score of 740 wants to negotiate a price to $775,000 and put 20% down for a mortgage of $620,000. Using a market rate of 6.5% with no points the payment would be $3918.82 a month.
If instead the buyer offers full price for the house and asks the seller to pay loan discount fees up to $25,000, a buyer can now reduce the rate significantly. That $25,000 can permanently buydown the rate for the borrower to about 5.125%. The payment on the full price offer would be $3485.00. This is a savings of $433.82.00 a month, and $156,175.00 over the term of the loan when compared to the home price reduction strategy. Using traditional home price negotiations, you’d have to reduce the home price down to $553,752.00 to get the same savings and we know the seller won’t do that for you. There’s another advantage. The seller gets full price for the home, and they can take a tax deduction for the discount paid as a cost of selling the home. So they recoup some of the money they spend at closing toward the discount. Wanna read more about this? What my videos on tax deductions for homeowners and go to my blog posts at www.heideInternational.com and then call me for your mortgage financing!