Seller concessions are incentives the seller offers the buyer as part of the purchase agreement. Common concessions include repair credits, closing cost assistance, and mortgage rate buydowns. Concessions typically total 1-3% of the sale price.
Concessions can make your offer more attractive without necessarily lowering your net proceeds, especially when paired with a higher offer price.
Types of Seller Concessions
Closing cost credits are the most common concession, where the seller agrees to pay a portion of the buyer's closing costs. Repair credits cover issues found during the home inspection, allowing the buyer to handle repairs themselves after closing. Rate buydowns use seller funds to permanently lower the buyer's interest rate, often called a 2-1 buydown. Prepaid items like property taxes or HOA dues can also be covered.
How Concessions Affect Your Net Proceeds
Concessions reduce the net amount you receive at closing, but they can make your home more marketable. A buyer who needs help with closing costs may be willing to pay a higher purchase price if the seller provides a credit. This means you can often increase the sale price by the amount of the concession, keeping your net proceeds roughly the same while making the deal work for the buyer.
Negotiating Concessions
Concessions are most common when the buyer needs help with upfront costs, or when inspection issues arise. As a dual-licensed loan officer and realtor, I can help you evaluate which concessions make sense for your situation. Some concessions like rate buydowns can be structured to benefit both you and the buyer.
There are limits to how much a seller can contribute. Conventional loans allow up to 3% concession on a down payment under 10%, while FHA allows up to 6%. VA loans have specific rules about what the seller can pay. Understanding these limits helps you negotiate effectively.
