A seller’s concession refers to a closure fee or other charge that the seller agrees to pay on behalf of the buyer. These concessions are negotiated during the offer process and help make the purchase more affordable for buyers without lowering the selling price of the home.
Whether you’re the first home buyer to buy a home in Charlotte, North Carolina, or a veteran buyer who buys a home in Atlanta, this Redfin guide will destroy sellers’ concessions and help you navigate negotiations with more confidence.
What is a real estate seller’s concession?
Seller’s concessions are financial contributions made by the seller to reduce the out-of-pocket costs when the buyer closes. These costs include lending fees, taxes, insurance, or even home guarantees.
For example, a buyer might ask the seller to pay $5,000 for closing costs. If agreed, this will be included in the contract and will be deducted from the seller’s revenue upon closing.
What can seller concessions cover?
Concessions usually include:
Title Insurance Appraisal Fees or Inspection Costs Loan Origin Fees Record or Lawyer Fees Prepaid Property Tax or Insurance Mortgage Points
Lenders limit the amount that sellers can contribute, depending on the type of mortgage they are involved in.
Why do sellers offer concessions?
Sellers may agree to the next concession.
Help buyers buy homes and attract more offers with slow market offset issues found during home inspections closure timeline
In the buyer’s market, or when the house is sitting for a while, concessions can make the difference between closing the transaction and continuing to wait.
Seller’s concession restrictions per loan type
Maximum Seller Contribution of Loan Types Traditional Maximum Seller Contribution of Purchase Price 3% Traditional (down 10-25%) 6% Traditional (down 25% + down) 9% FHA Loan 6% VA Loan 4% USDA Loan No formal limit (but should be reasonable)
These restrictions are set by the loan programme rather than the seller, so both the buyer and the seller must work with the lender to ensure compliance.
Pros and cons of seller concessions
For buyers
Strong Points:
Low savings and low cost savings make it easier to obtain qualifications (in some cases)
For the seller
Strong Points:
It can attract more buyers, helps to keep sales prices unharmed in competitive or slow markets
Potential drawbacks
If the total selling price is inflated, it could reduce the net profit of a seller in the market, if it could reduce the net profit of a seller
Tips for negotiating seller concessions
Before submitting your offer, understand the amount you need to pay for your closure. In a competitive market, they offer slightly higher prices to offset sellers’ concessions. Be prepared to justify your request using your funding needs or test results. Work with experienced Redfin real estate agents to guide your strategy.
The last note
The meaning of a seller’s concession goes beyond mere financial support. They act as negotiation tools that benefit both parties when used strategically. Buyers can reduce the cost of upfront payments, and sellers can sell their homes faster without reducing prices. Understanding when and how to use seller concessions gives you a stronger position in real estate transactions.
Seller’s concession FAQ
What does the seller’s concession mean in real estate?
A seller’s concession is the cost that the seller agrees to pay on behalf of the buyer, usually as it covers some or all of the buyer’s closure costs.
Are they negotiable?
Yes, they are usually negotiated as part of the initial offer and finalized in a purchase agreement.
Do they affect loans and valuations?
They can. If the concession exceeds the market value of the sale price, the house may not be valued at the agreed price.
Can they cover the down payment?
no. Concessions can only be used for acceptable closure fees and fees, not for buyer down payments.
Are they common?
This is especially common when FHA, VA, and USDA loans and when the market favors buyers.
