Can a seller pay the buyer's closing costs?

What are seller concessions?

A seller concession is an agreed-upon contribution from the seller toward the buyer's closing costs, written into the purchase contract. Instead of handing the buyer cash, the seller credits an amount at closing that offsets eligible buyer costs.

Concessions are negotiated as part of the offer. They don't happen automatically. The buyer requests them; the seller agrees or counters; and both parties accept the terms in the contract.

What can concessions cover?

Seller concessions can typically be applied toward eligible closing costs such as lender fees, title fees, prepaid items, and other transaction costs. What they can cover depends on the loan program and the lender. Not all costs are eligible under every loan type. Your lender is the right source for exactly what concession funds can be applied to in your specific transaction.

Concessions versus a price reduction

A seller concession is different from a seller simply lowering the purchase price. A price reduction puts money in the buyer's pocket over the life of the loan (through a smaller mortgage). A concession specifically offsets costs due at closing. Both can be useful, and which makes more sense depends on the buyer's priorities and loan structure.

How this affects the seller

Sellers should evaluate offers based on net proceeds, not just the purchase price. An offer with a higher price but a significant concession request may net less than a slightly lower offer with fewer concessions and cleaner terms. Understanding the full picture of each offer, rather than just the headline number, is part of what an experienced Realtor brings to the seller's side.

What sellers should know

The amount a seller can contribute toward buyer costs is subject to limits that vary by loan program and lender guidelines. Sellers should work with their agent, and buyers should confirm with their lender, what's permitted in a given transaction.

A note on strategy

One of the most common misconceptions about closing cost concessions is that they make the transaction more expensive for the seller. Sometimes they do, and sometimes they're part of a negotiated structure that helps the seller achieve a successful sale they might not have otherwise. Context matters.