4 Deals Home Buyers Can Negotiate, From Mortgage Rate Buydowns to Free Repairs

After years of being at sellers’ mercy, homebuyers can finally breathe.

In markets where inventory is outpacing demand and contracts are falling through, sellers are getting desperate.

This is an opening for motivated buyers: homebuilders and homeowners are cutting asking prices and, in some cases, offering incentives or concessions.

“There are more homes to fill than there are buyers out there,” Daryl Fairweather, chief economist at Redfin, told Business Insider. “Those are going to vary by geography, but especially in places where there’s a lot of new construction, it is a buyer’s market.”

While Fairweather says homebuilders are generally more willing to negotiate than existing homeowners — many of whom are locked into pandemic-era low mortgage rates — there’s still room to bargain in today’s real estate market.

Here are four deals worth negotiating as a homebuyer, along with their benefits and risks.

A lower purchase price

A lower purchase price has many benefits. Because the down payment is a percentage of the price, a reduction cuts your upfront costs. It also pays off over time: If you have a mortgage, you’ll borrow less, so your principal-and-interest payment decreases, reducing the total interest paid over the life of the loan.

Fairweather says builders are more likely than existing homeowners to agree to a price cut.

“Existing homeowners can just continue to live in the home if they don’t get a high enough offer,” Fairweather said. “Builders, on the other hand, are more motivated because every day that a home doesn’t sell is a day that they’re paying interest or that they don’t have that money on their books.”

A mortgage rate buydown

In a mortgage rate buydown, a home seller or builder pays to temporarily reduce a buyer’s interest rate for the early years. When that period ends, the rate reverts to its original note.

An alternative option for buyers seeking a permanent cut is to purchase discount points at closing. Typically, one point equates to 1% of the loan and cuts the rate by 0.25%.

It’s important to remember a mortgage rate buydown is temporary. That means your interest rate will eventually increase, which can be challenging if you’re not prepared for the higher costs. A buydown may also not pay off if you’re planning to sell your home in the short term or if rates drop below your current rate.

“It might be better to ask for something that’s more permanent — like upgraded kitchen countertops — so your home has more long-term value,” Fairweather said. “But I think a lot of buyers are thinking more about their monthly budgets, especially in the near term, which is why so many like the idea of a mortgage buydown.”

Asking the seller or builder to cover closing costs

Closing costs are fees required to finalize a home purchase that aren’t included in the sale price. They cover things like loan origination, appraisal, title services, and attorney fees. Typically, you pay 2%-5% of the loan amount in closing costs, which can add up to thousands of dollars.

If a seller or builder covers some or all of your closing costs, you could put more money toward repairs, renovations, furniture, or other expenses.

Asking the seller to cover repairs

If you’re buying a home that’s less than perfect, say, the HVAC needs updating or you want better landscaping, you can negotiate several things: ask the seller to pay for the service or repair, provide a credit at closing, or lower the overall purchase price.

Fairweather said that homebuyers often do this with newly built homes.

“Usually they’re little customizations that you can do to the home that you can negotiate on to get complimentary, or to have a lower price on,” she said.

It won’t always be a buyer’s market

While there are plenty of deals to be had now, that might not always be the case.

“It depends on where rates are headed,” Fairweather said. “I think that rates are going to continue to drop, and that if that happens, by spring, there’ll be more buyers in the market.”