Seller Concessions
Seller concessions are when the home seller agrees to pay some of the buyer's closing costs as part of the purchase negotiation. Rather than reducing the sale price, the seller contributes a set dollar amount or percentage toward the buyer's costs at closing. Concessions are limited by loan type—typically 3–9% of the purchase price depending on down payment and loan program.
Seller concessions are a popular tool in buyer's markets or when buyers have strong cash positions for the down payment but not closing costs. Instead of a price cut from $400,000 to $390,000, a buyer might negotiate the full $400,000 price with $10,000 in seller concessions—effectively netting the same savings but structuring them as closing cost credits rather than a lower purchase price.
Limits by loan type: FHA allows up to 6% of the purchase price. VA allows up to 4% for 'concessions' plus unlimited closing cost contributions. USDA allows up to 6%. Conventional loans allow 3% with less than 10% down, 6% with 10–25% down, and 9% with 25%+ down. Concessions above these limits must be deducted from the purchase price in the appraisal.
Sellers may be more willing to offer concessions when the home has sat on the market, when the buyer is competing with other financed offers, or when the seller is highly motivated to close quickly. In a hot seller's market, asking for concessions can make your offer less competitive. Work with your real estate agent to strategically time concession requests.
Key Takeaway
Seller concessions are when the home seller agrees to pay some of the buyer's closing costs as part of the purchase negotiation. Rather than reducing the sale price, the seller contributes a set dollar amount or percentage toward the buyer's costs at closing. Concessions are limited by loan type—typically 3–9% of the purchase price depending on down payment and loan program.
Related Terms
Frequently Asked Questions
Yes. Seller concessions can be used to pay discount points at closing, permanently buying down your interest rate. This is called a 'permanent rate buydown.' A 2-1 buydown using concessions is also popular—it temporarily reduces the rate by 2% in year one and 1% in year two.
Appraisers are informed of concessions when comparing your sale to market comps. The appraised value reflects the home's value, not the terms; however, excessive concessions above program limits may require a price adjustment.
Most closing costs: origination fees, appraisal, title insurance, recording fees, prepaid taxes and insurance, and discount points. They cannot typically be applied toward the down payment itself.
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