1Pair-off in one minute
Pair-off is not a penalty. It's the unwind of a trade that didn't get used.
When the builder signs, Capital Markets buys that pricing the same day. Homes that close draw the pool down. Whatever isn't used has to be unwound at that day's market. It costs the builder only when both keys turn:
Delivered · rates roseNo pair-offNothing left to unwind.
Delivered · rates fellNo pair-offThe homes closed. Nothing to unwind.
Came up short · rates roseTypically no costSay "typically." Never promise a gain comes back.
Came up short · rates fellThis is the pair-offOn the undelivered part only.
Say it out loud"When we set this up, we buy that pricing that day. It's a real trade. If you sell the homes, none of this comes up. If you come up short and rates fell in the meantime, the part you didn't use is unwound at the new market, and that difference passes through. On the unused part, never the whole pool."
2Size the pool so it never comes up
- Commit to the floor, not the forecast. Size it to a bad quarter. They can always come back for a second pool.
- Standing homes first. Homes that exist and are nearly finished deliver.
- Short window on a first trade. A window they beat builds the relationship.
- Ask who else sells their buyers. If another lender takes half the buyers, half the pool won't deliver.
3Get from Capital Markets before any builder signs
- The tolerance band. How far under they can land with no pair-off at all. This is the number that calms builders down.
- How pair-off is calculated, and when. Measured against what, on what date.
- The window and any extension. An extension fee is not a pair-off. Keep them apart.
- Unused points vs. pair-off. Two buckets. Unused points refund; any pair-off nets against that. Say both halves.
Dave Bennett, Capital Markets, models the community, prices the trade and prepares the Bulk Trade Agreement. You get the builder to yes. You don't quote trade terms.
4The money four
Every objection is really a different question. Answer the real one.
"The points cost too much."
- Really asking
- Is this cheaper than what I'm already doing?
- Say
- "Compare it to what gets your buyer the same payment. On a home near a million, the price cut runs about $91,700. The permanent buydown is about $32,000. The price cut costs nearly three times as much, and your list price never moves."
- Don't say
- A points number. Capital Markets prices the trade on the day.
"What if my homes don't sell?"
- Really asking
- Am I signing up for a bill on homes I never closed?
- Say
- "Two things have to go wrong first: you land outside the tolerance, and rates fall. Short in a flat or rising market, there's typically nothing to pay. And it's only ever on the part you didn't deliver."
- Don't say
- "You get all your money back." Unused points refund, less any pair-off.
"What if rates drop? I'll have overpaid."
- Really asking
- Am I buying at the top?
- Say
- "On every home you deliver, a falling market just narrows your edge. Your buyer still closes below the market. The only place a drop costs you is volume you committed and didn't use. So the real variable isn't rates. It's delivery."
- Don't say
- Any forecast. Not "rates won't drop," not "rates are going up."
"We already do 2-1 buydowns."
- Really asking
- Why change something that's working?
- Say
- "A temporary 2-1 gets you a closing and hands the buyer a higher payment a year later. This is permanent: a lower rate for the life of the loan, bought in bulk instead of one deal at a time. And depending on the loan program, it may not count toward your buyer's concession limit the way a seller-paid buydown does — we confirm that on each loan."
- Don't say
- That a 2-1 is outside the concession limit — a seller-paid 2-1 is a seller concession and counts. And never promise flat that the forward commitment is outside the limit; FHA and many investors count builder-funded buydowns.
5The quiet four
These don't end the call. They end the follow-up.
"We have a preferred lender."
- Really asking
- Do I have to blow up a relationship?
- Say
- "Not at all. This runs alongside them. It's an option for your buyers, not a requirement, and buyers pick their own lender either way. It costs you nothing to let me model it and compare."
- Don't say
- Anything that sounds like steering, requiring or rewarding buyers for using us. That's RESPA.
"I don't have that much to commit."
- Really asking
- Is this built for a builder my size?
- Say
- "Then we size it to what you'll close in a slow quarter, even a handful of homes. And if you can't name what's closing, I won't talk you into a pool you can't fill."
- Don't say
- A pool bigger than their floor. An unfilled pool is how a builder ends up with a pair-off.
"Can you promise my buyers that rate?"
- Really asking
- How solid is this number?
- Say
- "Nobody can promise a rate, and I won't. What I can show you is the target and how the trade holds it. Once Capital Markets places the trade, that's what your buyers price against."
- Don't say
- A promised rate or APR, in any form, in writing or out loud.
"My buyers can just refinance later."
- Really asking
- Why pay for this today?
- Say
- "Maybe, and that's upside for them. But a refi doesn't help you today. The payment on the sheet today decides whether they sign. You're buying the sale."
- Don't say
- "They can always refi in a year." That's a rate forecast.
6Words that lose the room
- "Penalty." It's an unwind at market.
- "You get all your points back." Unused points refund, less any pair-off. Both halves, every time.
- A pair-off number. It doesn't exist until the day it's measured. "I'll have Capital Markets model that for you" is the strong answer.
- "Almost three times." Say "nearly three times." "Permanent" for the commitment, "temporary" for a 2-1.
- Any promised rate, price or APR, or calling it a commitment to lend.
Internal LO training, not for distribution · · NMLS # · ·
CLEAR Home Loans, a Division of Aspire Home Loans, LLC · NMLS #1955132 · Equal Housing Lender