Seller Concessions

Seller concessions are when the seller agrees to pay some of the buyer's closing costs as part of the purchase agreement. Instead of requiring the buyer to come to the table with full cash for both the down payment and all closing costs, the seller absorbs some of those costs from their sale proceeds.

Concessions are often negotiated as a dollar amount or as a percentage of the purchase price. Common uses include covering lender fees, title insurance costs, prepaids, and other buyer-side closing expenses.

Not all loan types allow unlimited concessions. FHA, VA, and conventional loans each have caps on how much a seller can contribute, based on the purchase price and down payment amount.

Seller concessions allow buyers to reduce the cash they need at closing, which can make a home purchase possible when a buyer has enough for a down payment but is stretched for closing costs.

For sellers, concessions can be a useful negotiating tool, especially if you've received an offer at a price you like but the buyer is asking for help with costs. Concessions don't change the purchase price on paper (which matters for comps), but they reduce the seller's net proceeds.

A buyer offers $295,000 on a home and asks for $5,000 in seller concessions toward their closing costs. The seller counters at $298,000 with $5,000 in concessions, effectively netting $293,000, the same as if they'd accepted $293,000 with no concessions, but on paper the transaction records at $298,000. The buyer gets the closing cost help they need.

"Seller concessions hurt the seller."

Concessions come out of the seller's proceeds, but they don't necessarily hurt the deal. A seller who accepts $295,000 with no concessions and a seller who accepts $298,000 with $3,000 in concessions are netting the same amount. Concessions are a negotiating tool, not a loss, provided the final net to the seller meets their needs.