What Are Seller Concessions When Selling a Home?
A seller concession is something you agree to pay or contribute for the buyer as part of the transaction.
The important question is not whether concessions are good or bad. It is what the buyer is asking for, what it costs you and what you receive in return.
What Is a Seller Concession?
A seller concession is a negotiated seller-paid benefit that helps cover an expense connected with the buyer's purchase.
Depending on the buyer's financing, contract and lender approval, a seller contribution may be used toward allowable closing costs, prepaid items, discount points, an approved interest-rate buydown or other permitted transaction expenses.
The buyer does not get to decide this alone. You do not have to agree simply because the buyer asks.
Treat it the same way you would treat the purchase price, closing date, inspection rights or another negotiated part of the offer.
What If the Buyer Asks Me to Pay Their Closing Costs?
Do not evaluate the request by itself. Put it beside the purchase price and the rest of the offer.
A buyer may have enough income to qualify for the mortgage but prefer to keep more cash available for the down payment, moving expenses, reserves or other costs of buying the home.
That does not make the request unreasonable. It also does not mean you should automatically agree.
In this simple example, Offer B is $10,000 lower at the top but leaves $5,000 more before the remaining seller expenses are considered.
This is not a final net sheet. Listing-side compensation, any seller-authorized buyer-broker compensation, repairs, taxes, title charges, payoff and other transaction costs still need to be included.
See how a seller net sheet compares the complete money result →
A Concession Is Not the Same as Every Other Seller Cost
Seller Concession
Money or another negotiated benefit you agree to provide toward allowable buyer costs or another agreed transaction expense.
Buyer-Broker Compensation
A separate negotiable payment, if authorized by you, toward the broker representing the buyer.
Repair or Inspection Credit
Money negotiated because of a property-condition issue. The lender and closing agent may need to approve how the credit is documented or used.
Price Reduction
A change to the purchase price itself rather than a separate seller-paid credit.
You should be able to see what you are paying, why you are paying it and how it changes what you keep.
Is a Higher Price With a Concession Better?
Sometimes. Sometimes not.
A buyer may offer a higher contract price and ask you to return part of that amount through an approved concession.
That can work when the complete transaction makes sense and the financing supports it. But the higher price should not distract you from what you may actually keep.
Compare the Net
Subtract the concession and every other seller-paid item before deciding that the higher-priced offer is better.
Consider the Appraisal
A higher contract price can create more appraisal sensitivity when the buyer is financing the purchase.
Confirm the Financing
The buyer's lender determines whether the requested credit and intended use are permitted under the loan program.
How Much Can a Seller Contribute?
There is no single seller-concession limit that applies to every transaction.
Conventional, FHA and VA financing have different rules. The allowable amount can also depend on how the money will be used and the structure of the buyer's financing.
For example, conventional financing can apply different contribution limits based on factors such as occupancy and loan-to-value. VA also distinguishes ordinary buyer closing-cost payments from items it defines as seller concessions.
Before you rely on a requested concession, have the buyer's lender confirm that the amount and intended use are permitted for that loan. The closing agent should also confirm how the credit will appear on the closing documents.
Why Might Buyers Ask for More Concessions?
A buyer's request often reflects the choices available to that buyer.
When buyers have several comparable homes available, they may have more room to ask sellers for closing-cost help, repairs, credits or other favorable terms.
That still does not mean you must agree. Compare the request with the competition, current demand and the other terms of the offer.
How Should You Evaluate a Concession Request?
Put the Request in Dollars
Do not stop at a percentage. A 3% request on a $500,000 sale is $15,000. Make the cost visible.
Calculate What You May Keep
Include the purchase price, concession, listing-side fee, any seller-authorized buyer-broker compensation, repairs, title and settlement charges, taxes, payoff and other seller-paid items.
Understand Why the Buyer Is Asking
Is the request helping with closing costs? Is it being used for a rate buydown? Is the buyer trading a higher price for the credit? Understanding the structure helps you evaluate it.
Check the Financing and Appraisal
Confirm that the lender allows the requested credit and consider whether the contract price must be supported by an appraisal.
Compare Your Alternatives
Do you have another offer? Is buyer activity strong? Has the home been sitting? What can this buyer purchase instead? Your alternatives matter in the negotiation.
Accept, Reject or Counter
You can agree to the request, decline it, reduce it or counter another part of the offer. Look at the whole transaction before deciding.
You Have More Than Two Choices
Accept It
Agree when what you may keep, the financing and the other terms still make sense.
Reduce It
A buyer asking for $15,000 does not mean your only choices are $15,000 or zero. The amount can be negotiated.
Trade for Something
Evaluate the concession together with price, inspection terms, closing timing or another part of the offer.
Change the Price
Sometimes the parties negotiate a different price together with a seller credit, subject to financing and appraisal requirements.
Decline It
You can reject the request when the complete offer does not justify the additional cost.
Compare Another Offer
When there is more than one buyer, put the offers beside each other and compare estimated proceeds, contingencies, timing and risk.
Go to the Page That Owns the Next Question
Questions Home Sellers Ask
Do I have to pay the buyer's closing costs?
No. A buyer may ask you for a concession, but the request is negotiable. You can accept, reject or counter it.
Is a seller concession the same as buyer-broker compensation?
No. Keep them as separate transaction expenses. A seller concession generally addresses allowable buyer costs or another negotiated expense. Seller-authorized buyer-broker compensation is a separate negotiable payment toward the broker representing the buyer.
Is a seller concession the same as lowering the price?
No. A concession is a seller-paid credit or benefit within the transaction. A price reduction changes the contract price itself.
Can a buyer increase the price and ask for closing costs?
The parties can negotiate a price together with a seller credit, but the financing, allowable concession and appraisal still have to support the structure.
Is there a maximum seller concession?
There is no single limit for every transaction. The applicable rules depend on the buyer's financing and what the seller contribution is intended to pay. Confirm the specific request with the buyer's lender.
Should I agree to a concession in a buyer's market?
Not automatically. More buyer choices can increase negotiating pressure, but compare the complete offer, what you may keep, the competition and your alternatives.
Should I reject an offer because it asks for a concession?
Not automatically. Translate the request into dollars and compare the complete offer. A higher-priced offer with a concession can be stronger or weaker than a lower-priced offer without one.
What happens if the buyer cannot use the entire credit?
That depends on the loan program, lender requirements, contract language and closing structure. The buyer's lender and closing agent should confirm how the credit can be used before you rely on the amount.
Financing Rules Can Change
National Association of REALTORS® Consumer Guide: Seller Concessions explains seller concessions and the distinction between concessions and offers of compensation.
Fannie Mae Selling Guide: Interested Party Contributions explains conventional-loan contribution rules and limits.
HUD FHA Single Family Housing Policy Handbook 4000.1 is HUD's current source for FHA Single Family Housing policy.
U.S. Department of Veterans Affairs: VA Funding Fee and Loan Closing Costs explains VA treatment of buyer closing costs and seller concessions.
Put the Concession in Dollars Before You Decide
I will separate the purchase price, seller concession, buyer-broker compensation, repairs and other seller-paid expenses so you can see what the offer may actually leave you.
Then we can look at financing, appraisal risk, contingencies, timing and the buyer's other terms.
You make the decision. My job is to make sure you can see what you are deciding.
Jim Whatley, Broker/Owner • Uber Realty LLC • Florida Broker License BK3174026 • Florida Brokerage License CQ1038333 • Equal Housing Opportunity.
This page provides general seller education. It is not legal, tax, lending, appraisal or closing advice. Loan-program requirements, concession limits and allowable uses can change and should be confirmed with the buyer's lender and closing agent for the specific transaction.