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Guaranteed Rate is arming real estate agents with a not-so-secret weapon that homebuilders have been employing to help buyers cope with high interest rates: Mortgage rate buydowns.
Like many lenders, Guaranteed Rate had been offering both temporary and permanent mortgage rate buydowns to buyers. The new product, RateReduce Sell, is aimed at sellers, allowing them to pay points to lock in a discounted rate on a permanent buydown, which their agent can cite in co-branded marketing materials and in a property’s MLS listing.
Real estate agents can pitch the buydowns to sellers in listing presentations, and Guaranteed Rate has designed custom, co-branded flyers advertising discounted rates that agents can upload with listings or use in social media marketing, said Guaranteed Rate Senior Vice President Kathryn Amor, head of enterprise products at the Chicago-based lender.
Kathryn Amor
RateReduce Sell “allows a Realtor to compete with the types of programs they see builders offering,” Amor told Inman. “We’ve seen a tremendous response in this entire suite of programs.”
According to a survey of more than 100 builders by John Burns Research and Consulting, 60 percent used rate buydowns to do more deals, paying 5 percent to 6 percent of a home’s sale price to secure permanent buydowns that lower the borrower’s mortgage rate by 1 to 2 percentage points.
“Builders tell us temporary rate buydowns (for the first one to three years of the mortgage) do not solve the affordability problem, and most are committing to a 30-year rate buydown, particularly for first-time buyers,” John Burns reported in October.
Guaranteed Rate’s RateReduce Sell is a permanent buydown, with sellers paying discount points of between 2 percent and 9 percent of the loan amount to lock in a discounted rate on a Fannie Mae- or Freddie Mac-eligible mortgage.
In addition, sellers pay an upfront fee of $995 to lock a discounted rate on conforming loans for 60 days, or $2,500 for high balance loans above Fannie and Freddie’s 2024 $766,550 baseline conforming loan limit. That fee — which gives sellers 30 days to find a buyer, and buyers an additional 30 days to close — is refundable if the loan closes.
Buyers must put 20 percent down and have a FICO score of 760 or better, and meet Fannie and Freddie’s other requirements.
While interest rates have come down more than a percentage point from 2023 peaks registered in October, Amor said that the discounts available through RateReduce Sell can still be big enough to be eye-catching on yard signs and other marketing materials.
If market rates are 6 percent or 6.5 percent, Amor said, “you’re going to be advertising a rate that is maybe even down to like 4 percent or 5 percent,” on a yard sign or other promotional materials. “The points are so large that you can absorb a little bit of market movement without impacting the marketing appeal.”
In addition, the reduced rate is transferred to the buyer when they apply for a loan from Guaranteed Rate and sign a purchase contract — a “float down” policy that ensures that if mortgage rates drop while the home is being marketed, that will be reflected in the buyer’s rate.
The RateReduce Sell program can be attractive to both buyers and sellers, Guaranteed Rate says, because in the long run, the borrower can save more than if the seller simply offered a price concession.
A 5 percent price reduction on a $350,000 home means a buyer putting down 20 percent can take out a $266,000 mortgage instead of a $280,000 loan, saving them about $94 a month.
But if, instead of cutting the asking price by $14,000, the seller uses it to buy down the buyer’s mortgage rate by 1.8 percentage points, they’ll save $318 a month, Guaranteed Rate says in a pitch to agents.
Guaranteed Rate claims the program can help homes sell faster, and offers agents a tool when negotiating listing prices with sellers.
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