Key takeaways
- Seller concessions are a portion of buyer’s costs that the seller agrees to pay for, making it more affordable for the buyer to purchase the home.
- These concessions can include repairs or covering the cost of services like a home inspection.
- Seller concessions are more likely to be agreed upon in a buyer’s market, where sellers are more motivated to make a sale.
If you’re buying a home, you may be focusing on the price tag of the property, but there are other homebuying costs that can amass quickly and cut into what you can ultimately afford. Some buyers may have luck negotiating with the seller for concessions that help them pay these costs upfront. Here’s what seller concessions are, and how that strategy can work.
Seller concessions defined
A seller concession is a portion of the buyer’s closing costs or expenses that the seller agrees to pay for, lowering the overall upfront costs for the buyer. Sometimes, buyers ask for concessions when the home inspection turns up an issue that needs to be remedied. Other times, the buyer may ask that the seller pay for specific costs, such as the appraisal fee. The seller does not have to say yes, but it can make sense to agree to such requests in order to keep the buyer happy and keep the deal moving forward.
That doesn’t mean the buyer will get these costs taken care of in cash, though. When a seller agrees to make concessions, they’re usually agreeing to put some of the proceeds of the sale of their home toward the buyer’s costs.
Who benefits from concessions, buyers or sellers?
Hypothetically, concessions can actually benefit both parties: The buyer enjoys a discount, while the seller helps facilitate the sale by sweetening the deal.
Depending on what’s happening in the housing market, though, seller concessions don’t always pan out for the buyer. Asking for a concession often works better in a buyer’s market, when there are more homes for sale than buyers to purchase them. In these conditions, since demand is low, sellers might be anxious to offload their property and more willing to pay for some of the buyer’s costs to make a sale happen. In a seller’s market, however, with more buyers than listings and healthy interest, a seller may be much less inclined to help a buyer with costs.
What kinds of concessions can a buyer ask for?
Homebuyers can ask for seller concessions on a variety of costs, and can do so in their original offer or during negotiations.
Pay special attention to the home inspection report for any repairs that may need to be completed. For example, if the inspector discovers a plumbing or HVAC issue, you may ask the seller to shoulder the cost of repairs (or at least some of it) — asking to cover the cost of a needed repair is a very common concession request.
Other types of concessions a buyer might request can cover costs such as:
The question of who pays the real estate commissions is likely to come up as well. These costs historically have been the seller’s responsibility. But that is no longer the case as a result of a recent lawsuit settlement — now, who pays which agent’s fee is also subject to negotiation.
Limits on seller concessions
What’s allowed as a seller concession can depend on what’s customary in the local housing market, but it’s also based on the type of mortgage the buyer has, the size of their down payment and the kind of property being bought. Here’s how seller concessions break down by loan type:
| Mortgage type | Down payment | Allowable concession (as a percentage of purchase price) |
|---|---|---|
| Conventional (primary residence or second home) | Less than 10%
|
3% – 6% |
| 10% – 25% | 6% | |
| More than 25% | 9% | |
| Conventional (investment property) | Any amount | 2% |
| FHA | Any amount | 6% |
| USDA | Any amount | 6% |
| VA | Any amount | 4% |
So, if you’re buying a primary residence for $310,000 with a conventional loan, and you’re putting down 12 percent, or $37,200, the seller can agree to pay for up to 6 percent of the purchase price, or up to $18,600, toward closing costs. Your real estate agent can likely answer any questions you might have on this.
Bottom line
Seller concessions can reduce the costs homebuyers have to bear. Common concession requests can include asking the seller to pay for a needed repair or to cover the fee for a service like a home inspection. But there are limits to how much can be covered, and because the seller is not required to agree, they’re an option best exercised in a buyer’s market, when sellers have less leverage and may be more eager to sell.
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