Seller concessions are agreements by the seller to cover certain closing costs or fees on behalf of the buyer, making the home purchase more affordable without affecting the sale price.
Whether you’re a first-time homebuyer in Charlotte, NC, or a seasoned buyer in Atlanta, this Redfin guide provides insights into seller concessions to help you navigate negotiations with confidence.
Understanding Seller Concessions in Real Estate
Seller concessions involve the seller making financial contributions to reduce the buyer’s out-of-pocket costs at closing, covering expenses like lender fees, taxes, insurance, or home warranties.
For instance, a buyer may request the seller to pay $5,000 towards their closing costs, which would be outlined in the contract and deducted from the seller’s proceeds at closing.
Types of Costs Covered by Seller Concessions
Seller concessions typically include:
- Title insurance
- Appraisal or inspection fees
- Loan origination charges
- Recording or attorney fees
- Prepaid property taxes or insurance
- Mortgage points (to lower the buyer’s interest rate)
- HOA transfer or document fees
- A home warranty plan
Lenders impose limits on seller contributions based on the type of mortgage.
Reasons for Offering Seller Concessions
Sellers may agree to concessions to:
- Help buyers afford the home
- Attract more offers in a slow market
- Offset issues identified during the home inspection
- Accelerate the closing process
In buyer’s markets or with lingering listings, concessions can be the deciding factor in closing a deal.
Seller Concession Limits Based on Loan Type
| Loan Type | Max Seller Contribution |
| Conventional (<10% down) | 3% of the purchase price |
| Conventional (10–25% down) | 6% |
| Conventional (25%+ down) | 9% |
| FHA Loan | 6% |
| VA Loan | 4% |
| USDA Loan | No formal limit (but should be reasonable) |
These limits are determined by the loan program and should be adhered to by buyers and sellers in collaboration with a lender.
Pros and Cons of Seller Concessions
For Buyers
Pros:
- Lower initial costs
- More financial flexibility
- Potential ease of qualification
For Sellers
Pros:
- Enhanced buyer attraction
- Preservation of sale price
- Effectiveness in competitive or slow markets
Potential Downsides
- Possible appraisal complications from inflated sale prices
- Reduction in seller’s net profit
- Reduced effectiveness in strong seller’s markets
Tips for Negotiating Seller Concessions
- Determine closing cost requirements before making an offer
- In competitive markets, consider slightly higher offers to accommodate concessions
- Be prepared to justify concession requests based on financing or inspection outcomes
- Seek guidance from an experienced Redfin real estate agent to refine your negotiation strategy
Final Thoughts on Seller Concessions
Seller concessions extend beyond financial assistance, serving as a beneficial negotiation tool for both parties when utilized strategically. Buyers can reduce upfront expenses, while sellers can expedite sales without price reductions. Understanding the utilization of seller concessions enhances your position in real estate transactions.
FAQs about Seller Concessions
What Do Seller Concessions Mean in Real Estate?
Seller concessions are expenses covered by the seller for the buyer, typically to address some or all closing costs.
Are Seller Concessions Negotiable?
Yes, they are typically negotiated as part of the initial offer and finalized in the purchase agreement.
Do Seller Concessions Impact the Loan or Appraisal?
They can. If concessions push the sale price above market value, the home may not appraise at the agreed price.
Can Seller Concessions Cover the Down Payment?
No. Concessions are strictly for allowable closing costs and fees, not the buyer’s down payment.
Are Seller Concessions Common?
They are particularly prevalent with FHA, VA, and USDA loans or in buyer-favoring markets.