Seller concessions

Seller concessions are closing-cost items that the seller agrees to pay on the buyer's behalf, usually as a negotiated term in the purchase contract. The most common forms are credits at closing (a flat dollar amount applied to the buyer's closing costs) and direct payment of specific buyer charges (the seller pays the buyer's title insurance premium, for example).

How it works: a buyer's offer can include a request for seller concessions, "Seller to credit Buyer $10,000 toward closing costs" is a typical line. If accepted, the credit appears on the settlement statement and effectively reduces the buyer's cash-to-close. Concessions also commonly arise during inspection negotiation: rather than the seller making specific repairs, the seller offers a credit that the buyer can use to address the items post-closing. Lenders cap how much in seller concessions a buyer can accept, typically 3% of purchase price for conventional loans with under 10% down, scaling up to 9% with 25%+ down, with FHA and VA having their own caps.

Why it matters: concessions are a way to reduce buyer cash requirements at closing without changing the headline price. A $510,000 contract with $10,000 in concessions has the same net to seller as a $500,000 contract with no concessions, but the buyer's cash-to-close is lower (because the loan is bigger relative to the home price, financing more of the closing costs).

Common gotcha: lender concession caps mean that requesting more in concessions than the program allows can require restructuring the deal. A 3.5%-down FHA buyer asking for 8% in concessions on a competitive offer hits the FHA cap (6% in this case) and the excess concession either has to be removed or restructured as a price reduction. Loan officers can confirm what a specific loan program allows before the offer goes in.