Win at Selling a Home in St Louis

Posted by admin on Apr 16, 2010

In a recent report by the Federal Reserve reported a slight economic improvement in all Federal Reserve districts EXCEPT THE ST LOUIS District, which is reported as “soft.” With an overall weak economy in St Louis and an ever increasing number of homes being foreclosed on, it is difficult to see a silver lining for anyone trying to sell a home in St Louis.

Tough times often cause us to look at things from a different prospective.  The same can be said for selling your home. Not long ago the strategy was to put your house on the market and let the bidding war begin. That was then- when it was a seller’s market. Today, home buyers are in control and can often name their price or walk down the street to next home listed for sale.

So how does a home seller win?  Well first look at the motives of a buyer. During  a seller’s market, the buyer’s motive was get an offer in as quickly as possible and high as possible before someone else stepped in and bought the home out from under them.  Today,  though, to put it in simple terms, a buyer’s motive is to buy their home for the least amount possible or to boil down further, a buyer wants to lower their monthly payment or recognize an greater overall savings over time.

While other sellers are “taking a bath” and negotiating on a sales price, smart sellers should consider ways that not only meet the needs of a buyer, but save themselves some serious cash too.  Seller paid discount points is an excellent way to achieve to this objective. While seller paid discount points (one discount point is equal to 1% of the loan amount) are not typical in the St Louis home market, they are very typical in other parts of the country. Why is a seller concession a win-win situation for a buyer and a seller?  First, look at a typical transaction involving a price reduction. In this example, let’s say the buyer and seller negotiated a $25,000 reduction in the purchase price of the home.  The cost to the seller is $25,000 and the savings to the buyer is about $107 per month.  On the other hand, if the seller were to pay discount points to the buyer they could lower their interest rate by as much as a full 1%.  This would be a cost to the seller of about $16,800 (savings of $8,200) and the savings to the buyer would improve to $166 per month.  Not only will the seller reduce their monthly payment by nearly $60, the discount points paid by the seller, is an allowable deduction for the buyer the year the home is purchased (please seek the advice of a qualified tax account regarding specific deductibility).  Also, if managed right, the buyer could actually owe less on the home in the next ten years.  Does that sound like a win- win to you?

A word of caution, not every buyer and every seller will benefit under this premise. It is important to seek the advice of a qualified expert who has the technology to analysis options for both the buyer and seller. In some cases, this option can actually cost a buyer more money than it saves.