Should You Cut Your Price or Buy Down the Buyer's Rate? We Ran the Numbers on $20,000

The first move most sellers make when a home sits is to cut the price.

They have plenty of company. Redfin reported that 22% of U.S. listings had a price drop in the four weeks ending October 11, the highest share in its records. The median asking price fell 0.3% from a year earlier, its first decline since March. In San Diego County, 22.3% of active listings carried a price reduction in August.

But what is the buyer actually struggling with? In this market, it's often the monthly payment. So is a price cut the best way to spend your $20,000?

Let's run it.

The example

Here's a simple scenario, for illustration only:

• Price: $1,000,000
• Down payment: 20%
• Loan: $800,000
• Rate: 7.3%, 30-year fixed
• Starting principal and interest: about $5,485 a month

The seller is willing to give up $20,000. Here's what that could do:

Option	Buyer's rate	Monthly P&I	Monthly savings
No change	7.3%	$5,485	None
$20,000 price cut (loan drops to $784,000)	7.3%	$5,375	About $110
Permanent buydown (assumes 2.5 points lowers the rate to about 6.675%)	6.675%	$5,149	About $336
Temporary 2-1 buydown (costs about $18,900)	5.3% in year 1, 6.3% in year 2, then 7.3%	$4,442, then $4,952, then $5,485	About $1,042, then $533, then $0

To the buyer's monthly budget, the same $20,000 can be worth about three times as much as a permanent buydown than as a price cut, and even more in the first year of a temporary buydown.

So is a price cut ever better?

Yes. A price cut has advantages that don't show up in this table:

• Search visibility. Buyers filter by price. Dropping below a round number, like $1 million, can put your home in front of new shoppers. A credit doesn't change the number they filter by.
• It lasts. A lower price means a lower loan and a lower down payment for the whole life of the loan, and it can slightly reduce property taxes. A temporary buydown ends.
• Simplicity. Buyers understand a lower price right away, while a buydown takes some explaining.
• Appraisal. If your price is above what comps support, a credit doesn't fix that.
• Buyers who may refinance. If rates fall and the buyer refinances soon, money spent on a permanent buydown may not fully pay off.

How to decide

A buydown may make sense when:

• Your price fits recent comps, but buyers are stuck on the payment
• You'd rather protect your sale price
• Your likely buyer is using financing and watching the monthly number

A price cut may make sense when:

• You're priced above recent sales
• You've had few showings
• You're just above a popular search price
• Your likely buyer is paying cash or making a large down payment

You can also do both. Redfin found 15.8% of U.S. sales in August included both a price drop and a concession, the highest August share in its records.

Why we lean on the 2-1 buydown

This isn't just theory for us. When rates climbed to about 8.25% a few years ago, we used seller-paid 2-1 buydowns heavily, and they're useful again now.

For higher-priced homes, the math is especially clear. On a $1.5 million or $2 million listing, a $20,000 price cut barely registers. Buyers barely notice it, and it rarely changes anyone's mind. Spent on a 2-1 buydown, similar money can lower the buyer's payment in a way they actually feel.

It speaks to buyers' biggest fears right now:

• "What if rates drop after I buy?" The buydown lowers the payment for the first two years, which can help bridge the gap if rates fall and refinancing becomes an option.
• "What if prices keep falling?" Buying during a slow stretch may mean negotiating a better price than in a busier market.

And the seller protects their price. In many cases, the seller gives up less than a price cut would cost them to get the same buyer interested.

One thing to know: lenders often qualify buyers at the full rate, not the temporarily reduced one. A buydown helps with the payment, not necessarily with how much the buyer can borrow.

Market it, or it won't work

A credit nobody knows about won't bring anyone in the door. If you offer a buydown, put the payment savings in your marketing, with a lender's help so the numbers are accurate and compliant.

Also check the limits: loan programs cap seller contributions, and actual buydown pricing changes with the market.

The bottom line

Before you cut your price, ask what problem you're trying to solve. If buyers can't find you, price may be the answer. If they love the home but can't stomach the payment, the same money may go further somewhere else.

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Is your home sitting, or are you about to list? Talk to our team. We do the real estate and the mortgage, so we can run both sides of this for your home.

Sources: Redfin, Sellers' Asking Prices Fall for the First Time Since March · Redfin, San Diego County Housing Market Update: August 2026 · Redfin, Nearly Half of Homebuyers Get Concessions. Payment examples are The GreenHouse Group's own illustrations, not Redfin data. Buydown experience as discussed in our November 2026 Market + Money episode.

Disclaimer: Educational purposes only. The GreenHouse Group Inc. (CA DRE #01859042 | NMLS #366847). We are real estate and mortgage professionals, not CPAs, tax advisors or attorneys. This content is not individualized real estate, financial, tax, legal or lending advice. Examples are rounded illustrations of principal and interest only, not rate quotes, loan offers or guarantees. They exclude taxes, insurance, HOA dues and fees, and the assumed buydown cost is hypothetical. Actual rates, points, buydown costs and concession limits vary by lender, program, borrower and date. All loans are subject to approval. Market data comes from the cited third-party source and dates. The GreenHouse Group is not affiliated with Redfin.