Rate buydown or price cut, same 12k out of my margin

Question

Finished spec, listed at 469, three weeks in with decent traffic and no offer. My agent wants to advertise a permanent buydown, roughly 12k of points to the buyer's lender, which on a loan that size moves the payment enough to matter. My alternative is just cutting to 457 and keeping the message simple.

The argument for the buydown is that the buyers walking through can afford the house and can't afford the payment at a little over 6 percent. Twelve thousand spent on points does more for their monthly number than twelve thousand off the price does, so on pure payment math the buydown wins. It also protects the closed price, which matters to me because the appraisals on my next two houses in the same subdivision will lean on this one.

The argument for the cut is that buydown advertising reads as a builder in trouble, the buyer has to use a lender who'll actually execute it, and half the traffic won't understand the offer well enough to be moved by it. A lower number is a lower number and it shows up in every search filter.

Any concession structure has to be confirmed in writing with the buyer's lender since what a lender will allow toward points varies, and I'm learning that the hard way. Still, on the raw question of where to spend the 12k, I'm split.

luis_carrera · Answer

The comp protection argument is the one I'd weigh heaviest and it's the one you mentioned almost in passing. If you're building two more in the same subdivision, a recorded 469 with a concession is a different starting point than a recorded 457, and appraisers will find the concession but they don't always subtract it dollar for dollar. Keep in mind that in a handful of states sale prices aren't public at all, so how much this matters depends entirely on where you are.

megan_doyle15 · Answer

Three weeks with traffic and no offers sounds short to me. What's normal on a new build before you'd expect a real offer?

gregpowell66 · Answer

Rigging, it varies hugely by market and price band, but three weeks with steady showings and zero offers is usually the market telling you the number is 2 or 3 percent high, not 10. Cairn, the thing I'd check before either move is whether the showings are dying at the same point. If people are walking out at the kitchen or the yard, that's a product complaint and no amount of payment engineering fixes it. If they love it and disappear afterward, it's the payment, and then the buydown is the sharper tool.

jessreyes12 · Answer

I'd have been embarrassed to ask this in person, so here goes. If you do the buydown, does the buyer have to keep that specific loan for it to be worth anything to them? A permanent buydown on a loan they refinance in eighteen months when rates ease seems like you spent 12k for eighteen months of benefit, whereas 12k off the price is theirs forever. Does that not cut against the buydown in a market where everyone expects rates to drift down?

tashaford30 · Answer

Compass has found the real objection. Buyers who believe rates fall in 2027 should prefer the price cut, and buyers who need the payment to work today take the buydown. Cairn, you don't have one buyer, you have whichever type walks in, so I'd ask the agent which of those two people has been showing up. That's answerable from the feedback she already has.

Rate buydown or price cut, same 12k out of my margin

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