Can I Offer Incentives Like Rate Buydowns to Attract More Buyers?

When mortgage rates are high, buyers often face a tough reality — their dream home might suddenly feel out of reach because of higher monthly payments. But as a seller, you can use creative strategies to bridge that gap without slashing your asking price. One of the most effective? Offering incentives like rate buydowns.

What Is a Rate Buydown?

A rate buydown is when the seller contributes money at closing to lower the buyer’s mortgage interest rate. This can be:

• Temporary – such as a 2-1 buydown, where the rate is reduced by 2% the first year, 1% the second year, and then returns to the original rate in year three.

• Permanent – where the rate is lowered for the entire life of the loan.

Why This Works in a High-Rate Market

Instead of dropping your asking price by $10,000–$20,000, a smaller seller credit toward a buydown can often reduce the buyer’s monthly payment more significantly. That savings can make your home much more appealing compared to others on the market.

Other Incentives That Work

In addition to rate buydowns, sellers can sweeten the deal with:

• Covering some or all of the buyer’s closing costs

• Offering a home warranty

• Including furniture, appliances, or upgrades

• Paying for HOA dues for the first year

How to Promote Incentives Effectively

If you decide to offer a rate buydown or other perks, make sure they’re highlighted in your:

• MLS listing

• Marketing flyers

• Open house materials

• Social media posts

Buyers — and their agents — need to see the value upfront.

Offering incentives like rate buydowns can be a win-win: buyers get lower monthly payments, and you can sell faster without drastically cutting your price. In today’s market, creativity and flexibility often close the deal.

FAQs

1. How much does a rate buydown cost a seller?

It depends on the buyer’s loan amount and the size of the rate reduction. For example, a 2-1 buydown might cost a seller 2–3% of the loan amount, which is often less than a significant price cut.

2. Can I offer a buydown on any type of loan?

Most conventional, FHA, and VA loans allow seller-paid buydowns. However, the lender will have specific rules and limits, so it’s best to confirm with the buyer’s lender early.

3. Do buydowns work better than lowering my price?

In many cases, yes. A buydown directly reduces the buyer’s monthly payment, which can feel more impactful than a price drop — especially when rates are high.

4. Are there tax benefits to offering a buydown?

The cost of a buydown is generally treated as a seller concession, not a tax deduction. Buyers may benefit more on the tax side, but always consult a tax professional for specifics.

5. What if I don’t want to pay for a buydown?

You can still offer other incentives like paying part of the closing costs, including furniture/appliances, or providing a home warranty to make your property more attractive.

6. Will offering incentives make my home sell faster?

While there’s no guarantee, incentives can help your home stand out, especially in a competitive or high-interest-rate market.