Thinking about offering a price cut or a rate buydown on your Sebastopol home? If your goal is to help buyers afford the monthly payment without giving away too much equity, the choice matters. You want a clean, confident sale that protects your bottom line and gets the deal done. In this guide, you’ll see clear, Sebastopol‑focused examples that compare temporary and permanent buydowns with price reductions, plus practical tips on when each approach works best. Let’s dive in.
Price cuts explained
A price cut means you lower the list or contract price. That reduces the buyer’s loan amount, which slightly lowers the monthly principal and interest payment. It also reduces your gross proceeds and can influence comparable sales and market perception.
For sellers, the net effect of a price cut is the amount you reduce minus the commission percentage applied to that reduction. Price cuts can attract attention if you were overpriced or if the market needs a nudge.
Rate buydowns explained
A rate buydown lowers the buyer’s interest rate by paying money up front to the lender. The sale price and loan amount stay the same, but the buyer’s monthly payment drops according to the buydown structure.
Temporary buydown (2-1 or 1-0)
- A 2-1 buydown typically lowers the rate by 2% in year one and 1% in year two. In year three, the loan returns to the original note rate.
- The upfront cost funds the present value of the monthly payment shortfall during the buydown period. In many cases, sellers pay this as a concession at closing.
- Payment relief is front-loaded, which can help rate-sensitive buyers or buyers who expect income growth.
Permanent buydown (discount points)
- You or the buyer pays discount points to permanently reduce the note rate for the life of the loan.
- Market convention: one point often equals 1% of the loan amount and can lower the rate roughly 0.25% to 0.375%. Actual pricing varies by lender and day.
- Permanent buydowns generally cost more upfront than a temporary buydown but provide lasting monthly savings.
Sebastopol market context to check
Before you choose a tactic, confirm a few local items with your agent and lender:
- Current Sebastopol median sale price and typical price ranges from the last 30 to 90 days.
- Common down payment levels in active deals (20% is a frequent baseline in examples).
- Prevalence of seller concessions and temporary buydowns in recent MLS remarks.
- Typical total commission and seller closing cost ranges in Sonoma County.
- Live lender quotes for current 30‑year fixed rates and pricing for 2‑1 and permanent buydowns.
- Conforming loan limits versus jumbo usage in Sebastopol, which can affect underwriting and pricing.
Side-by-side payment examples
The following examples use illustrative assumptions from lender-style math so you can see the relative impact. They exclude taxes, insurance, HOA, and PMI to keep apples-to-apples.
Assumptions for examples:
- Note rate: 6.50% (30‑year fixed)
- Temporary buydown: 2‑1 (Year 1 at 4.50%, Year 2 at 5.50%, Year 3+ back to 6.50%)
- Down payment: 20%
- Monthly payment factors per $1,000 of loan: 6.50% → $6.322; 5.50% → $5.675; 4.50% → $5.068
Example A: $700,000 price (loan $560,000)
- Baseline at 6.50%: $3,542/month
- Year 1 at 4.50%: $2,839/month → savings $702/month
- Year 2 at 5.50%: $3,178/month → savings $362/month
- Estimated one-time 2‑1 buydown subsidy: about $12,063 (roughly 2.16% of the loan)
Example B: $1,000,000 price (loan $800,000)
- Baseline at 6.50%: $5,058/month
- Year 1 at 4.50%: $4,054/month → savings $1,004/month
- Year 2 at 5.50%: $4,540/month → savings $518/month
- Estimated one-time 2‑1 buydown subsidy: about $17,243 (roughly 2.16% of the loan)
Example C: $1,400,000 price (loan $1,120,000)
- Baseline at 6.50%: $7,085/month
- Year 1 at 4.50%: $5,676/month → savings $1,409/month
- Year 2 at 5.50%: $6,356/month → savings $729/month
- Estimated one-time 2‑1 buydown subsidy: about $24,240 (roughly 2.16% of the loan)
Key takeaway: In many cases, a 2‑1 buydown’s cost is about 2.1% to 2.2% of the loan amount, while giving buyers very large first-year payment relief compared with a modest price cut.
Seller net proceeds: buydown vs price cut
Here is a simple way to compare what a price cut or a buydown might cost you in net proceeds.
- Seller net (approximate): Sale Price − Commission − Seller closing costs − Other fees.
- Net impact of a price cut: Price Cut × (1 − Commission Rate).
- Net impact of a buydown: approximately the one-time buydown cost.
To match a given buydown cost with a price cut:
- Required Price Cut = Buydown Cost / (1 − Commission Rate).
Net comparison at the $1,000,000 example
- Estimated 2‑1 buydown cost: $17,243.
- If total commission is 5.0%: Required price cut to match net = $17,243 / 0.95 ≈ $18,148.
- That price cut lowers the buyer’s loan by about 80% of $18,148, or $14,518. At 6.50%, that is roughly $92/month in payment reduction.
- Contrast: the 2‑1 buydown saves the buyer about $1,004/month in year one.
To create the same first‑year monthly payment drop as the 2‑1 buydown (about $1,004/month), you would need a far larger price cut. The math suggests an estimated price reduction near $198,250 at this example’s assumptions, with a much larger hit to seller net.
What this means: If your goal is to make the monthly payment workable, especially in the first year or two, a seller‑funded 2‑1 buydown is usually far more payment‑efficient than a price cut of similar cost.
When each strategy makes sense
Consider a temporary buydown if
- You want to attract rate‑sensitive buyers with meaningful early payment relief.
- You want to preserve the recorded sale price for comps while offering a concession.
- The buyer’s lender confirms the buydown structure and qualification approach upfront.
Consider a permanent buydown if
- The buyer plans to hold the loan for a long time and values lifetime payment savings.
- Lender pricing for points is favorable at the time of your listing or offer.
Consider a price cut if
- You need to reposition quickly to meet the market and improve traffic.
- Appraisal risk is a concern and you want a lower contract price to help the appraisal.
- The buyer prefers immediate equity and a smaller loan balance.
Underwriting, appraisal, and tax notes
Underwriting and qualification
- Some lenders qualify buyers at the full note rate, even with a temporary buydown. Others may allow qualification using the reduced payments if the buydown is fully funded and documented. Have the buyer’s loan officer confirm in writing how qualification will work for your specific program.
Appraisal and valuation
- A price cut reduces the contract price and can ease appraisal pressure.
- A seller‑paid buydown keeps the price higher, so the appraisal must still support that price.
Taxes and accounting
- Seller-paid buydowns are typically treated as concessions that reduce seller net proceeds. The tax treatment of points and concessions can vary. Encourage buyers and sellers to consult their CPA or tax advisor.
How to structure your Sebastopol deal
For sellers:
- Confirm your target list price and likely buyer profile with your agent.
- Ask 2 to 3 local lenders for written quotes showing today’s rate, a 2‑1 buydown cost, and a one‑point and two‑point permanent buydown.
- Compare your likely net using a modest price cut versus a seller‑funded buydown.
- Decide how to market the concession: highlighted payment incentive or revised price.
For buyers:
- Have your lender run side‑by‑side scenarios: no buydown, temporary 2‑1, and permanent points.
- Ask whether the lender will qualify you at the note rate or the buydown payment.
- If you are close to qualifying or need early payment relief, consider requesting a seller‑funded 2‑1.
Bottom line for Sebastopol sellers
Price cuts are simple and can help with appraisals and market positioning, but they produce modest monthly payment relief per dollar. Temporary buydowns often deliver big early monthly savings for buyers at a relatively small one-time cost to you. Permanent buydowns can be worthwhile when buyers plan to hold the loan long term and lender point pricing is attractive.
If you want help modeling the numbers for your Sebastopol property, we will run the scenarios, gather live lender quotes, and recommend a strategy that protects your net while increasing buyer confidence. Reach out to Cozza Team anytime.
Ready to compare a buydown versus a price cut on your home? Connect with Cozza Homes Inc. to schedule a free, no‑obligation home consultation.
FAQs
What is a 2‑1 buydown in simple terms?
- It temporarily lowers the buyer’s interest rate by 2% in year one and 1% in year two, then returns to the original note rate. A one-time upfront cost funds the difference in payments.
How much does a 2‑1 buydown cost at $1,000,000?
- Using a 20% down example and a 6.50% note rate, the estimated 2‑1 subsidy is about $17,243 on an $800,000 loan, roughly 2.16% of the loan amount.
How does a price cut compare to that buydown cost?
- With a 5% total commission, you would need about an $18,148 price cut to have a similar effect on your net as paying the $17,243 buydown cost, but the buyer’s monthly savings would be much smaller than with the 2‑1.
Will a buydown help a buyer qualify for a mortgage?
- It depends on the loan program and lender. Some qualify at the note rate, while others may allow the buydown payment if the subsidy is fully funded. Get written confirmation from the lender.
Does a price cut help with appraisal risk?
- Yes. A lower contract price can make it easier for the appraisal to support value. A buydown keeps the price higher, so the appraisal still needs to support that price.
Are seller‑paid points or concessions tax‑deductible?
- Tax treatment varies by situation and program. Buyers and sellers should consult a CPA or tax advisor for guidance.
