Seller-paid points are one of the best things you can use as a seller to get your house off of the market and into someone else's hands. Your home may look amazing, but if the cost is too much for the current market to bear, you might get stuck with it on your hands for too long. Seller-paid points are one of the best ways to keep your profit in check while making the home sell quickly, so keep reading to learn more about seller-paid points, what they mean and how you can use them to your advantage.
1. What are seller-paid points?
The term "seller-paid points" refers to a discount the seller is able to offer to the buyer that involves paying a certain percentage of the sale price to reduce the long-term mortgage payments for the seller. Let's look at an example to get a better idea.
Jim is selling his home for $200,000, but he's having some trouble finding a buyer due to the high mortgage rates in the area. Instead of reducing the cost and taking a hit, he uses seller-paid points and uses that to turn the local mortgage rates from 11% down to 10.25%.
Buying seller-paid points will usually cost about 1% of the sale price for each one, and they typically reduce the mortgage rate by a small amount, but it can vary quite a bit. In this case, Jim has paid $6000 for 3 points, which will reduce the mortgage by a total of .75%. This small investment has made the house much more desirable and widened the buyer pool, giving you a much better chance of selling it quickly for a reasonable price.
2. Seller-paid points vs. Investing in your property for sale
If you have the extra money set aside to make some investments in your home before you sell, then you should really consider what the return will be like. When it comes to selling your home, which is better for the final sale price of your home? Is it worth putting in a $10,000 pool, or would it be better to put that money towards seller-paid points? Let's look at the possible situations that might happen if you have an extra $5,000 to invest in your sale.
Investing money back into your property
Investing in your property depends largely on what you want to spend the money on and what your home needs. If you spend that money on something like roof repairs, new flooring, or a nice deck, then you might not make that money back because the buyer will not know what the initial issue looked like. If you get your home appraised, then make some repairs, you are more likely to find some spots you can fix at a reasonable price in order to improve the overall sale price of the home.
Investing in repairs or improvements in your home will help your sale price, but it's a bit of a gamble. Installing a hot tub will likely increase the value of your home, but it isn't necessarily a "selling point" for some people who understand the maintenance and extra energy costs. Upgrading the appliances sounds great, but if the buyer doesn't spend much time in the kitchen, then the upgrades aren't very appealing, so you have to make sure you improve things that will apply to everyone that could be buying the home.
Using Seller-Paid Points
If you want a guarantee in selling your home quickly and giving yourself a large selling pool, then using seller-paid points with your $5000 is going to be the better investment for you. Upgrades can sometimes take quite a while to finish, and you don't want to rely on that timeline for your sale. If something goes wrong, you might spend more than you want and wait longer than you'd like for the construction job to be finished.
If your home is in bad shape, then that could be another reason to go with sell-paid points over upgrades. A buyer might not want the house if they have to pay an extra $15k to update it, but they might be willing to look over all the issues if they plan on staying there for a long time. The seller-paid points will entice them by lowering the mortgage rate and allowing them a bit more financial freedom to upgrade the home when they choose to.
3. What's the difference between seller-paid points and seller concessions?
Seller concessions are agreements or payments that are made in between the seller and the buyer to help the buyer with extra costs that come with the sale of the home. The concession can vary, and the limits on what the sellerr can cover change from place to place, so you need to check and make sure of the limitation before you start making offers.
Concessions are things like closing costs, real estate agent fees, inspection fees, and fees from other sources, and a seller will typically offer to pay some of these fees to make the sale go smoother or to entice the buyers to choose their home over others. If the buyer is on the fence about your home, offering to pay some of these concessions is a great start to making the process easier for them, and they are likelier to choose your home.
4. Are seller-paid points a good idea for a quick sale?
If you are thinking about which way to go as far as investing in a quick sale, then it all depends on the type of buyers you might have for your home. If you have a firm sale price and are looking for a buyer who wants the home long-term, then seller-paid points might be the better option for everyone. If you are in a buyer's market with plenty of homes available, then you need to give the buyers a bit more, so offering to pay concessions might be the way to go.
Selling your home can be difficult in specific markets, and seller-paid points are one of the easiest ways to make the sale more desirable without renovating your home. They are one of the simplest and easiest ways to make the deal more enticing. If you are having trouble selling your home, or you know that it might be challenging to unload it after you've listed it, then look into using seller-paid points to make the sale much sweeter.