Seller concessions are costs the seller pays toward the buyer's closing costs. They are negotiated as part of the purchase contract. Common concessions: closing cost credits (3-6% of price), repair credits, home warranty, and rate buydowns. In a buyer's market, concessions are expected. In a seller's market, you can push back. Your agent handles the negotiation.
What Concessions Are: Closing Cost Credits, Repairs, Warranty
Seller concessions are costs the seller agrees to pay on the buyer's behalf. The most common is a closing cost credit, where the seller contributes 3-6% of the purchase price toward the buyer's closing costs. Other concessions include paying for a home warranty, covering inspection repair costs, and buying down the buyer's mortgage rate with discount points.
When to Offer Concessions: Buyer's Market, Negotiations
In a buyer's market (high inventory, fewer buyers), concessions are often expected. Buyers may request them to reduce their out-of-pocket costs. In a balanced market, concessions are sometimes needed to close the deal. Even in a seller's market, offering small concessions can help you attract more offers and build goodwill with the buyer.
When to Resist: Seller's Market, Multiple Offers
In a strong seller's market with multiple offers, you can resist concessions or offer none. When you have multiple buyers competing for the home, you can choose the offer with the fewest contingencies and no concession requests. However, consider the total picture -- a slightly higher offer with concessions may net you the same or more than a slightly lower offer with none.
How Concessions Affect Net Proceeds
Every dollar you give in concessions reduces your net proceeds. A $5,000 concession costs you $5,000 at closing. However, concessions can make your offer more attractive to buyers, potentially helping you get a higher sale price. For example, a buyer might offer $305K with $5K concessions instead of $300K with no concessions. The net is the same, but the buyer gets the cash they need.
Negotiation Strategy
Your agent will handle concession negotiations as part of the purchase contract. The strategy depends on market conditions, the buyer's financial situation, and your goals. In many cases, offering a modest concession can help salvage a deal that is stuck on price or repair issues. The key is understanding the total cost of concessions vs a price reduction.
Alternatives to Concessions: Price Reduction
Instead of offering concessions, you can reduce the sale price. A price reduction of $5,000 costs you the same as a $5,000 concession, but it may affect the buyer differently. Some buyers prefer a lower price (lower property taxes, lower down payment), while others prefer concessions (cash to cover closing costs). Discuss the best approach with your agent.
