Selling your home often involves negotiation. One valuable tool to attract buyers, navigate through deal obstacles, and close quicker is the seller concession. Instead of lowering your asking price, you can offer to cover specific costs or provide credits that reduce the buyer’s upfront expenses.
Whether you are selling a property in Seattle, WA, Austin, TX, or Chicago, IL, this Redfin guide will guide you through examples of seller concessions, why they are important, and when it makes sense to offer them.
What are seller concessions?
Seller concessions are incentives that sellers agree to provide during the home selling process. They typically involve covering or offsetting some of the buyer’s expenses, which can lower upfront costs and make the purchase more affordable.
Common concessions include:
- Paying for closing costs such as escrow, title insurance, or loan origination fees
- Offering credits for repairs or upgrades identified during a home inspection
- Contributing towards a buyer’s interest rate buydown to reduce monthly mortgage payments
- Providing perks like home warranties, cosmetic allowances, or personal property such as appliances
In essence, concessions do not alter the price of your home, but they do impact the financial situation for the buyer.
When do seller concessions make sense?
Seller concessions often come into play during negotiations to help address cost or timing challenges. These are the most common scenarios:
- During inspection negotiations: If issues are found during a home inspection, sellers may offer credits instead of completing repairs.
- When financing requires fixes: Some loans (FHA, VA) necessitate homes to meet specific standards. A seller concession can cover the cost.
- In slower markets: Concessions can attract budget-conscious buyers.
- For a quicker close: Sellers may offer credits to expedite the timeline.
Common seller concession examples
Seller concessions can help expedite a home sale without reducing the listing price. They enhance your home’s appeal and attract potential buyers. Understanding various seller concession examples is crucial for devising the best strategy and making informed decisions as a seller.
1. Repair credits
One of the most prevalent seller concession examples involves offering credits for repairs instead of carrying out the repairs yourself. This saves time for sellers and provides buyers with flexibility to address updates post-closing.
Example: During the inspection, the buyer’s inspector identified an aging water heater. The seller offered a $1,500 credit at closing instead of replacing it.
Why it works:
- Saves the seller time and hassle of arranging repairs.
- Gives the buyer flexibility to fix or upgrade on their timeline.
When to use:
- Common during inspection negotiations.
- Works well in markets where buyers expect move-in-ready homes.
>> Read: Your Guide to Selling a House That Needs Repairs
2. Closing cost assistance
Another popular seller concession example is assisting with closing costs. These upfront expenses can significantly increase a buyer’s total, and a credit from the seller can make your home stand out.
Scenario 1: In a slower market, the seller offers $5,000 towards closing costs (escrow, title, and lender fees).
Why it works:
- Reduces the buyer’s upfront costs.
- Makes your home more competitive without lowering the price.
When to use:
- Especially effective in sluggish markets where buyers have more leverage.
- Common in expensive metro areas where closing costs are steep.
3. Interest rate buy-downs
An interest rate buydown is a highly effective seller concession, particularly with current mortgage rates. It makes monthly payments more affordable for buyers and can increase the number of potential offers you receive.
Scenario 1: A buyer is stretching to afford monthly payments, so the seller covers mortgage “points” to lower their interest rate.
Why it works:
- Makes monthly payments more affordable for buyers.
- Expands the pool of eligible buyers.
When to use:
- During times of rising interest rates.
- When you want to make the home accessible to buyers with limited budgets.
>> Read: When It Makes Sense to Buy Down Your Mortgage Interest Rate
4. Other common seller concessions
Apart from major credits, sellers sometimes offer smaller perks to enhance the deal. These seller concession examples may not be as costly but can still make a significant impact for buyers.
- Home warranties: Offer a one-year home warranty to reassure buyers about older systems.
- “As-is” credits: Provide a set amount instead of managing multiple small repairs.
- Personal property inclusions: Leave behind appliances, furniture, or outdoor equipment.
- Cosmetic allowances: Credits for painting, flooring, or other updates buyers may desire.
- Flexible closings or lease-backs: Adjust the timeline for a smooth transition for the buyer or seller.
How to use seller concessions strategically
Seller concessions can significantly boost your home’s appeal and expedite its sale. However, like any negotiation tactic, their successful use relies on proper timing and implementation.
Final tips to remember:
- Price with concessions in mind: Consider potential concessions when setting your listing price to ensure you do not compromise your profit.
- Don’t lead with concessions: Initiate with price and value first; use concessions as a negotiation tool.
- Frame them as buyer benefits: Position concessions as enhancements that add value, not giveaways.
- Put everything in writing: Clearly document concessions in the purchase agreement to prevent misunderstandings later.
- Know your limits: Establish boundaries in advance so you do not feel pressured to offer more than you are comfortable with.
When strategically planned, seller concessions can benefit both parties by reducing buyer costs and enabling you to close deals faster while safeguarding your profits.
Seller concessions FAQs
1. Do seller concessions affect a home’s appraisal value?
Seller concessions do not directly impact the appraised value. However, unusually high concessions may lead lenders to question if the price reflects market value, potentially affecting loan approval.
>> Read: What is a Home Appraisal? Everything You Need to Know About the Home Appraisal Process
2. Can I repair issues myself instead of offering a concession?
Yes, but it depends on your priorities. Repairs give you cost control and appeal to buyers seeking move-in readiness, but concessions save time and stress, offering buyers flexibility. If you need a quick sale, concessions are easier. If buyer confidence is key, completing repairs upfront can be more attractive.
3. Can offering seller concessions make buyers suspicious?
Sellers should present concessions as added value, such as assisting with closing costs so buyers have more funds for updates, instead of offering unusually generous concessions that might raise suspicions of hidden issues with the home.
4. Are seller concessions more common in certain housing markets?
Yes, seller concessions are more prevalent in slower or high-cost real estate markets. This is due to buyers having more negotiating power or facing higher initial expenses. Conversely, in competitive markets with numerous offers, sellers are less inclined to offer concessions as strong buyer interest already exists.
5. Do seller concessions have tax implications for home sellers?
Seller concessions typically reduce the amount you receive from the sale, but how they are treated for tax purposes can vary. For instance, a $400,000 sale with $10,000 in concessions may leave you with $390,000 in net proceeds. Tax rules can be intricate, so it is crucial to confirm your specific situation with a qualified tax professional.