When mortgage rates go up, most of the attention is focused on buyers. But higher rates have a very real impact on sellers, too.

The reason is pretty simple: today’s buyers in Parker, Colorado are shopping as much by monthly payment as they are by purchase price.

When mortgage rates increase, even a relatively small change can add a meaningful amount to a buyer’s monthly payment. That affects how much home they can comfortably afford and, in some cases, how much they’re willing to offer.

For sellers in Parker and throughout the Denver metro area, that means pricing and marketing a home correctly is more important than ever.

New Construction Is Part of the Competition

One of the things sellers need to understand in today’s market is that you’re not always competing only against other resale homes.

In many areas, you’re also competing against builders.

And builders have one advantage most individual homeowners don’t have: they can use financial incentives very aggressively to attract buyers.

According to Realtor.com, nearly 1 in 5 newly built homes are being advertised with some type of buyer incentive. One of the most common incentives is a reduced mortgage rate, often accomplished through a builder-paid mortgage rate buydown.

That can be very attractive to a buyer.

A buyer may look at two similarly priced homes and discover that the new home comes with a significantly lower mortgage rate. Suddenly, the new home may have a substantially lower monthly payment.

That doesn’t necessarily mean the new home is the better house. But from the buyer’s perspective, the monthly payment can be difficult to ignore.

Sellers Can Offer Incentives Too

Here’s something many homeowners don’t realize:

Mortgage rate buydowns aren’t exclusively for builders.

Depending on the buyer’s financing and the terms of the transaction, a seller may also be able to contribute money toward a buyer’s closing costs or mortgage rate buydown.

Does that mean every seller should offer one?

Absolutely not.

There are several ways we can make a home more attractive to buyers. Depending on the property and the competition, we might consider:

  • A mortgage rate buydown

  • A contribution toward closing costs

  • A price adjustment

  • Completing certain repairs or improvements

  • Offering another concession that is particularly valuable to the buyer

The key is determining which strategy gives the seller the greatest return for the money spent.

For example, reducing the price by $10,000 may not change a buyer’s monthly payment nearly as much as using some or all of that money toward an interest-rate buydown.

That’s why I believe sellers should look at the numbers before automatically reducing their price.

Your Home May Have Advantages a New Home Doesn't

There’s another side to this equation that sellers shouldn’t overlook.

New construction may have attractive financing incentives, but an established home can offer things a new subdivision may not.

That might include mature landscaping, larger trees, an established neighborhood, finished basements, window coverings, fencing, decks, patios, upgraded landscaping and other improvements that can cost a new-home buyer tens of thousands of dollars after closing.

Location can be another major advantage.

An existing home may be closer to Downtown Parker, schools, shopping, restaurants, parks, trails and other amenities that buyers value.

Those advantages need to be clearly communicated in the marketing.

We don't just want buyers comparing purchase prices. We want them comparing the entire value of owning each home.

Pricing Still Matters

There is one thing incentives and good marketing can't overcome indefinitely: an unrealistic asking price.

Builders tend to react quickly when buyer demand changes. They adjust prices, offer incentives or change financing packages to keep homes moving.

Individual sellers sometimes take longer to make that adjustment.

It’s understandable. Your home is personal, and it’s natural to remember what a neighbor sold for a year or two ago or what homes were bringing when the market was moving much faster.

But buyers aren't purchasing your home in the market from two years ago.

They're purchasing it in today's market, with today's mortgage rates and today's monthly payments.

That doesn't mean you have to give your house away. Far from it.

It means we need to understand exactly what buyers are comparing your home against and position it accordingly from the beginning.

This Is Where Local Market Knowledge Matters

Real estate is extremely local.

The amount of new-construction competition facing a seller in Parker may be very different from what a homeowner faces in Castle Rock, Centennial, Highlands Ranch, Aurora, Elizabeth or Franktown.

It can even vary considerably from one neighborhood to another.

Before we put a home on the market, I want to know more than what the last few houses sold for.

I want to know:

What homes are currently competing with yours?

How long have they been on the market?

Which homes have reduced their prices?

What concessions are sellers offering?

Are builders nearby offering mortgage incentives?

And most importantly, what is a buyer likely to see when they compare those homes with yours?

That's how we determine the right pricing and marketing strategy.

The Bottom Line

Higher mortgage rates haven't eliminated buyers. But they have made buyers much more conscious of affordability and monthly payments.

Builders understand that, which is why many are using mortgage rate buydowns, closing-cost assistance, price reductions and other incentives to attract buyers.

Home sellers need to understand that competition too.

The answer isn't necessarily to lower your price or start giving away thousands of dollars in concessions.

The answer is to understand your competition and use the right combination of price, presentation, marketing and incentives to make your home the better choice.

If you're thinking about selling a home in Parker or one of the surrounding communities, I'd be happy to sit down with you and look at exactly what you're competing against — including resale homes and new construction.

Then we can determine what it will take to put your home in the strongest possible position to sell.