Sellers are cutting prices. Here’s how buyers can make the most of it.
Price cuts are showing up on listings again, and more sellers are accepting that their first asking price missed the mark. In many California neighborhoods, sellers are adjusting sooner than they did when inventory was tight. For buyers, that creates room to negotiate. It also raises a bigger question: how should your financing fit into the plan?
Why sellers are cutting prices
Most sellers who cut their price didn’t overprice on purpose. Many listed at a number that matched the market a few months earlier, then watched showings slow down and offers stay quiet. For some, a price cut has become the cost of getting the sale done.
Across many local markets, the result is a steady stream of price reductions. That tells you sellers are competing for buyers who have more choices than they did recently. The pattern is uneven, though. A well-priced home in a popular neighborhood can still get several offers in a week.
Where buyers have the upper hand when prices are cut
When homes sit on the market longer, buyers have time to compare and to walk away. Sellers who need to move often respond to a slow stretch with a price cut rather than waiting another season.
You can also ask for more than a lower price. Many sellers who want to close will agree to a seller credit toward your closing costs, or toward a rate buydown. Your strongest position comes from knowing what similar homes recently sold for, because that’s the number the appraiser will use too.
Price cut, seller credit or rate buydown?
This is where your loan strategy matters. A lower price, a seller credit and a rate buydown can each save you money, but they show up differently in your monthly payment and your cash at closing.
A lower price reduces your loan amount for the life of the loan. A seller credit can cover closing costs, so you keep more cash in the bank. A buydown uses the credit to lower your interest rate, either for the first few years or for the full loan, which lowers your monthly payment.
The right choice depends on how much cash you have, how long you plan to stay and what payment you’re comfortable with. Before you make an offer, ask your loan officer to run all three side by side. The sticker price doesn’t always tell you which deal is better. The Consumer Financial Protection Bureau has a helpful explanation of how points and lender credits work.
Tips for buyers
Start by checking how long each listing has been on the market and whether the price has already been cut. A home with a recent reduction may be more flexible, but a lower price alone doesn’t make it a bargain.
Get fully pre-approved before you shop. When sellers are weighing several offers, a solid pre-approval and clean terms can carry as much weight as the price. If you’re buying your first home, here’s how I help first-time buyers get ready.
Tips for sellers
Price your home against what’s selling now, not what you hoped to get a year ago. Pricing it right from the start usually costs less than a series of price cuts, which can make buyers wonder what’s wrong with the house.
If you’re selling so you can buy your next home, the timing gets trickier. Buying before you sell can take some of the pressure off your sale.
Common questions
Does a price cut mean I should offer even lower?
Not always. Some homes are cut to the right price, and a lowball offer can cost you the house. Look at recent sales of similar homes first, then decide with your agent how much room there really is.
What is a seller credit?
A seller credit is money the seller agrees to put toward your costs at closing. It’s written into your purchase contract, and loan programs set limits on how much you can receive.
What is a rate buydown?
A buydown is an upfront payment that lowers your interest rate. A temporary buydown lowers it for the first year or two, and a permanent buydown lowers it for the life of the loan. A seller credit can often be used to pay for it.
Make the most of a buyer’s market
Today’s buyer advantage is real, but it isn’t a free pass to lowball every listing. In this market, realistic pricing, clean offers and solid financing carry more weight than they did when homes sold in days. If you’d like to see how a price cut, a seller credit and a buydown compare on a home you’re considering, book a strategy call and I’ll run the numbers with you.