What Are Seller Concessions?

Seller concessions are costs the seller agrees to pay on behalf of the buyer at closing. They're a negotiation tool that can help close deals, but understanding them is essential to protecting your bottom line.

Common Types of Concessions

Closing Cost Credits

The most common concession is a credit toward the buyer's closing costs. Instead of lowering the sale price, you agree to pay a portion of the buyer's expenses like:

• Loan origination fees
• Title insurance
• Escrow fees
• Prepaid items (taxes, insurance)

Repair Credits

Rather than making repairs before closing, you might offer a credit so the buyer can handle repairs themselves after moving in.

Home Warranty

Paying for a home warranty policy is a relatively inexpensive concession that provides the buyer peace of mind.

Why Concessions Happen

Buyer's market: When inventory is high, sellers may need to offer concessions to compete.

Buyer's limited cash: Some buyers can afford the mortgage payment but are stretched thin on closing costs. Concessions help them get into the home.

Inspection findings: Rather than making repairs, a credit might be offered post-inspection.

Price preservation: Sometimes it's better to offer concessions than lower the sale price, especially for appraisal purposes.

Loan Limits on Concessions

Different loan types cap seller concessions:

Loan Type	Maximum Concession
Conventional (>20% down)	9% of sale price
Conventional (10-20% down)	6% of sale price
Conventional (<10% down)	3% of sale price
FHA	6% of sale price
VA	4% of sale price + extras
USDA	6% of sale price

Concessions vs. Price Reduction

Which is better? It depends:

Concessions are often better when:

• The buyer needs help with closing costs
• You want to maintain your sale price for comparables
• The appraisal might be tight

Price reduction might be better when:

• The buyer doesn't need closing cost help
• You want a cleaner transaction
• The market demands it

How Concessions Affect You

Remember: concessions come out of your proceeds. A $10,000 concession reduces your net just like a $10,000 price reduction.

The key is understanding why a concession is being requested and whether it makes sense for getting your home sold at a price you're comfortable with.

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Navigating an offer with concession requests? Let's talk about your options.