What They Are and How They Benefit Homebuyers
Prepared by: Brian Tilton
Buying a home comes with more than just the purchase price—closing costs, prepaid
expenses, and other fees can add up quickly. Fortunately, seller concessions can help
reduce your out-of-pocket costs. But what exactly are seller concessions, how common
are they in today’s market, and how can you request them?
What Are Seller Concessions?
Seller concessions are costs that the seller agrees to pay on behalf of the buyer to
help cover certain expenses associated with purchasing a home. These
concessions are negotiated as part of the purchase agreement and can make a
home purchase more aƯordable, especially for buyers with limited cash reserves.
How Common Are Seller Concessions in Today’s Market?
The prevalence of seller concessions depends on market conditions within a specific
region.
In a buyer’s market (where there are more homes for sale than buyers), sellers
may be more willing to oƯer concessions to attract oƯers.
In a seller’s market (where demand is high and inventory is low), sellers may
have multiple oƯers and be less inclined to provide concessions.
In today’s market, concessions are fairly common due to aƯordability challenges
from higher mortgage rates. Last year, 40% of home purchases in California had
a seller concession. Generally, the concession amount averages 1% to 3% of
the purchase price.
How Can a Buyer Request Seller Concessions?
Work with Your Real Estate Agent: Your agent can help determine if requesting
concessions is appropriate based on the home’s price, condition, and local market
trends.
Negotiate in the Purchase Agreement: The amount and use of seller concessions
should be clearly stated in your purchase oƯer.
Consider a Higher OƯer (If Needed): If a seller is reluctant, some buyers negotiate by
oƯering slightly more for the home in exchange for seller-paid concessions.
However, the home must still appraise at the agreed-upon price.
What Can Seller Concessions Be Used For?
Lender guidelines determine how seller concessions can be applied. Common uses
include:
Closing Costs: Covers lender fees, title insurance, escrow costs, and more.
Rate Buydowns: Helps reduce your mortgage rate by covering discount points.
Prepaid Expenses: Can go toward property taxes and homeowners insurance.
Repairs or Upgrades: In some cases, concessions may be used to cover
necessary repairs or home improvements.
Limits on Seller Concessions
DiƯerent loan types have limits on how much a seller can contribute:
Conventional Loans: Typically 3%–9% of the purchase price, depending on down
payment size.
FHA Loans: Up to 6% of the purchase price.
VA Loans: Up to 4% of the loan amount.
USDA Loans: No specific limit but must be reasonable.
Final Thoughts
Seller concessions can be a powerful tool to help reduce upfront costs and make
homeownership more aƯordable. If you’re considering buying a home, talk to your
real estate agent and Integrity Capital to determine how to structure your oƯer
strategically.
