Think about the last car commercial you saw. At the end, did the voiceover or text on the screen show the dealer’s invoice price? What about MSRP?
No. It featured the monthly payment. So why is almost every real estate listing focused on price and not payment? Unless the buyer is paying cash, they should be more concerned with their monthly payment then the final sales price. How can agents use this to their advantage?
Here are three specific strategies you can use to differentiate your listing with payment marketing:
1. Using Seller Concessions to Buy Down the Interest Rate
This was once a very popular way to market properties, but has fallen out of flavor due to the extremely low interest rate environment over the past few years. But even though rates are low, why not make them even lower? Let’s say you have a listing that is priced at $250,000 that has yet to sell, indicating a price reduction might be necessary. Instead of reducing a listing price by $12,500, suggest the seller give a concession of 3 percent. This will generally translate into a 0.5 percent reduction in the potential buyer’s interest rate. The resulting payment will actually be lower than a $12,500 price reduction, and your seller will net more money at the table.
2. Have the Seller Pay the Buyer’s Mortgage Insurance
This strategy works great if you have a listing that is ideal for first-time homebuyers. Private mortgage insurance has gotten increasingly more expensive over the past few years. On a $250,000 sales price and a 5 percent down payment, a buyer would be paying over $132 a month in mortgage insurance. However, with a seller concession of just 2 percent, that mortgage insurance payment is no longer necessary. In order to replicate the same $132 savings, the sales price would have to be reduced by a whopping $25,000. I’ve found this particular strategy extremely effective with first-time homebuyers.
3. Copy What Works
Why not use the same strategy that car commercials have used? It must be working, or somewhere along the way they would have revamped their strategy. Even if your seller isn’t willing to do any sort of concessions, you can still market the property with payments. Figure out what an estimated monthly payment would be and add it to the marketing pieces for the property. Want to really stand out? Put “Own for $1,583 a month!” in the space where traditional flyers have the price. Be sure to check with your marketing department to ensure you are compliant with RESPA.
It would be a good idea to get together with your favorite lender to go over these strategies to make sure you have accurate figures and that the property itself does qualify.
Don’t have a lot of listings? Then use these strategies with your buyers. Not only will you separate yourself from other selling agents but you can also expand your buyer’s price range without increasing their payment.
Also keep in mind that these can be excellent negotiation tactics, as well. A well-planned counter-offer detailing the advantages to both parties may be accepted with less friction than back and forth price rebuttals.
Kevin Lanham, a loan officer and FHA specialist at Pacor Mortgage Corp, can be reached at: