In a Slowing Market, Price Is Only the First Step

The total amount a seller can offer a buyer is limited by the lender and depends on the type of loan and the amount of the down payment, loan officers say.

If there is 100 percent financing, borrowers with good credit might be able to get as much as 6 percent in seller contributions, said Laura Triplett, a vice president at Fairfax-based George Mason Mortgage. For loans made to those with credit issues, lenders "don't like to see more than 3 percent" of the price in seller subsidies.

Rick Eul, a mortgage broker with Bank of America in Annandale, said he is seeing seller contributions on the order of "3 or 4 percent of the sale price."

In addition, Eul said, "we've seen a couple of cases where . . . they're paying 7 percent commission instead of 6 percent." By raising the commission, which is split between the buyer's agent and the seller's agent, the seller can encourage more agents to show the house. With so many houses on the market, just getting a buyer's agent to tour a house is harder these days.

Closing help often is used to buy down the interest rate for the purchaser, loan officers say. Though interest rates are still relatively low compared with past decades, they are now the highest in four years.

Buyers can always reduce their interest rate permanently themselves by paying points. A point is 1 percent of the value of a loan and usually translates into about a quarter-percentage point reduction in the rate. Sellers can also pay those points.

On a $100,000, 30-year loan, it would cost $1,000 to buy down the rate permanently from, say, 7 percent to 6.75 percent.

Sellers can also help buyers get temporary buy-downs from lenders.

Lenders offer three kinds of temporary buy-downs. In a 3-2-1 buy-down, a buyer can reduce the rate by 3 percentage points the first year, 2 percentage points the second year and 1 percentage point the third year by paying 1 percent of the loan for each percentage point in the reduction. On a $100,000 loan, the total cost of a 3-2-1 buy-down would be $6,000 -- $3,000 for the first year, $2,000 for the second and $1,000 for the third.

Lenders also offer a 2-1 buy-down, reducing the interest rate from say, 7 percent to 5 percent the first year and then cutting it to 6 percent the second year. That would cost $3,000 on a $100,000 loan. A 1-0 buy-down, which would reduce the rate from 7 percent to 6 percent for a year, would cost $1,000.

A borrower would save $16 a month for the life of a $100,000 loan if the rate were bought down permanently from 7 percent to 6 3/4 percent, Eul said. The savings from a 3-2-1 buy-down is $66 a month for the first year, he said.

Beyond Real Estate

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Some sellers are going for the exotic in hopes of standing out.