Sellers May Want to Consider Paying Points for the Buyer

Now that the market has slowed down significantly, sellers generally aren't able to choose from several offers. They may even find that the only buyer they have to work with is less than stellar. There are ways, however, of helping the buyer out to make the sale a win-win situation for everyone.

Helping out with closing cost s for buyers who don't have much savings is a common approach. However, another possibility exists that, unlike closing costs alone, may help the buyer feel more comfortable with the monthly payments, and that is paying points to buy down the rate. A couple of points (or 2% of the loan amount) could make the sale happen. And there are different ways of approaching points. For instance, instead of buying the rate down slightly for the whole life of the loan, it may make more sense with younger buyers to buy the rate down for several years with the rate gradually going up. The assumption is that younger buyers' slaries will increase over time. Also, especially if it's a starter home, they're likely to outgrow it in a few years and will be ready to sell and buy up.

Buyers should ask their lender how points paid by the seller could lower their payments and even put a more expensive property in their reach. Sellers, in turn, should have their agent or financial person crunch the numbers to see if paying points for the buyer could cost less than reducing the sale price.