Have you ever used an Interest Rate Reduction Mortgage as a negotiating tactic? This unique mortgage program will help sellers net more from their sale and help the buyer lower their payment (so they can afford a higher sales price). Your knowledge and experience with this technique will differentiate you from the fierce competition in your market.

Representing the Buyer

When you represent your buyer in a transaction, they are already pre-approved at where they want (or simply need) their payment to be. Depending on today’s interest rates and your buyer’s down payment, your price range for this homebuyer will be pretty well established.

By using an interest rate reduction mortgage, you’re negotiating a seller concession that will be used to buy down your buyer’s interest rate permanently. The result is that you and your buyer can make offers in a higher sales price range while preserving the payment your buyer needs to feel great about becoming a homeowner.

Representing the Seller

In a rising interest rate market, you are continually chasing affordability when determining what price for which you can place your seller’s home. When rates go up, offers begin rolling in lower and lower as buyers desperately try to keep their payment affordable.

Countering below-market offers with an interest rate reduction mortgage can rapidly open up the buyer pool, and increase the net proceeds to your seller.

An example of this would be when offers are consistently coming in at let’s say $30,000 below asking price. You now have two options: you can reduce the sales price by $30,000 and accept one of those offers, or you can help the buyer keep their payment the same while buying their desired home at a price much closer to your original asking price.

When using an interest rate reduction mortgage, every dollar in seller concessions that your seller offers to the buyer to permanently buy down their interest rate, that buyer can now afford more of the purchase price while keeping their payment the same as if you had sold them the home at a lower price.

Selling at a lower price only helps the buyer, not the seller. And let’s face it: a higher commission is always desirable for an agent. By offering to pay discounted points for the buyer, your seller nets an additional $2.00 for every $1.00 they give to the buyer.

In the above example, instead of reducing the price by $30,000, your seller pays $10,000 towards lowering the buyer’s interest rate. This gives the buyer a similar payment as they would have if you sold the home for $30,000 less.

Your seller now pockets an additional $20,000 from the sale, and you just prevented a low comparable from hitting your local market! 

Win, Win, Win.

This is the only negotiating strategy out there where literally every single party in the transaction walks away feeling like they got a great deal— including you. 

Your seller nets more. Your buyer can afford more. And you preserve home values in your farm. Everybody wins when everybody wins!

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