What Are Seller Concessions
Seller concessions are contributions a seller makes toward the buyer's closing costs or pre-paid expenses as part of a negotiated sale — reducing the buyer's out-of-pocket cash needed to close.
Seller concessions are agreements in which the home seller pays a portion of the buyer's closing costs or other transactional fees as part of the purchase negotiation. Rather than reducing the purchase price, the seller credits money to the buyer at closing — effectively helping the buyer come up with the cash needed to close.
Seller concessions are particularly valuable for buyers who have the income and credit to qualify for a mortgage but are short on liquid cash for the full combination of down payment and closing costs.
What Seller Concessions Can Cover
Concessions are applied to buyer-side expenses, which may include:
- Loan origination fees
- Appraisal fee
- Title search and title insurance (lender's policy)
- Attorney fees
- Prepaid interest (per diem interest from closing to end of month)
- Homeowners insurance premium (first year)
- Property tax escrow reserves
- Discount points to buy down the interest rate
Seller Concession Limits by Loan Type
Lenders cap how much in concessions sellers can contribute — limits are based on loan type and down payment percentage:
| Loan Type | Down Payment | Seller Concession Limit |
|---|---|---|
| Conventional | <10% | 3% of purchase price |
| Conventional | 10–24.99% | 6% |
| Conventional | 25%+ | 9% |
| FHA | Any | 6% |
| VA | Any | 4% (plus unlimited for actual closing costs) |
| USDA | Any | 6% |
If a seller agrees to contribute more than the allowable limit, the excess is typically not applied to closing costs — it's simply lost from the transaction rather than reducing the price.
How Seller Concessions Affect the Offer
Seller concessions are negotiated as part of the purchase offer. Rather than asking the seller to lower the price, a buyer might offer full asking price and request a 3% concession. From the seller's net perspective, these can be equivalent — but the higher purchase price matters for:
- The appraised value — the home must still appraise at or above the purchase price
- The buyer's loan amount — a higher purchase price means a slightly larger loan (and slightly more interest over time)
- Comparables — higher sale prices can benefit neighborhood comps
When Are Seller Concessions Most Common?
Seller concessions are more common in buyer's markets — when inventory is high and sellers have to compete for buyers. In a seller's market (low inventory, multiple offers), sellers typically refuse concessions because competing offers are often full-price with no requests for seller contributions.
When interest rates are elevated, sellers sometimes offer rate buydown concessions — contributing enough to permanently or temporarily reduce the buyer's interest rate. A seller-paid 2-1 buydown (where the rate is 2% lower in year 1, 1% lower in year 2, then normal in year 3) can significantly reduce the buyer's initial payment burden.
Negotiating Seller Concessions
Tips for buyers:
- Request concessions in the initial offer — don't wait for inspection negotiations to bring them up
- Pair a concession request with an offer price the seller can accept (requesting 3% concessions and also offering 5% below asking may be a non-starter)
- Frame concessions as helping both sides: the buyer gets cash to close, and the seller achieves (or gets close to) their target price
Work with a knowledgeable real estate agent who understands how to structure offers with concessions in your specific market — it's one of the most useful negotiating tools available to buyers.