Seller Concessions Explained: A Smart Way to Save on Home Buying Costs

If you're starting your home-buying journey, you’ve probably come across the term “seller concessions” — and you may be wondering what it really means. Good news: seller concessions can be a big win for buyers, helping reduce upfront costs and giving you more flexibility during negotiations.

In this guide, we’ll break down what seller concessions are, how they work, and when to ask for them — so you can buy smarter and budget better.

🔍 What Are Seller Concessions in Real Estate?

Seller concessions are agreements where the home seller agrees to cover certain buyer expenses during the real estate transaction. These typically include closing costs, prepaid fees, or even credits for repairs. They’re negotiated during the offer phase and become part of the official purchase agreement.

✅ Common Examples of Seller Concessions

Seller concessions generally fall into one of three categories:

1. Closing Costs

These are fees due at the end of the transaction. Seller concessions might cover:

• Loan origination and processing fees

• Escrow and title insurance costs

• Appraisal and home inspection fees

• Attorney fees

• Transfer taxes and recording fees

2. Prepaid Expenses

These are expenses paid upfront, like:

• Property taxes

• Homeowners Association (HOA) dues

• Homeowners insurance premiums

3. Home Repairs or Improvements

Sometimes sellers offer concessions for:

• Completing necessary repairs

• Providing repair credits

• Offering a home warranty

🔁 How Do Seller Concessions Work?

Seller concessions are negotiated at the time you make an offer or during counteroffers — especially after the home inspection reveals issues. Once agreed upon, concessions are written into the purchase contract and are legally binding.

In many cases, these concessions are applied directly to the buyer’s closing costs, reducing the amount of cash you need at closing. Your real estate agent will guide you through the process to ensure everything is negotiated and documented correctly.

💰 Seller Concessions vs. Price Reduction

Both strategies reduce your financial burden, but in different ways:

• Seller Concessions help with upfront costs (like closing fees) but don’t reduce your mortgage amount.

• Price Reductions lower the actual purchase price of the home, which also reduces your loan amount and long-term interest costs.

Which is better? If you're tight on cash now, concessions can help. If you're looking to save over time, a price reduction might be the smarter move.

🚫 Can Seller Concessions Be Used for a Down Payment?

No. Seller concessions cannot be applied toward your down payment. Mortgage lenders require the buyer to provide their own down payment funds. However, by covering other upfront costs, seller concessions free up your cash, making it easier to meet your down payment requirement.

🧾 Seller Concession Limits by Loan Type

Each loan type has rules about how much a seller can contribute:

✅ FHA Loans

• Up to 6% of the home’s purchase price

• Can be applied to closing costs and prepaid expenses

✅ Conventional Loans

• 3% limit if your down payment is under 10%

• 6% if your down payment is 10%–25%

• 9% if your down payment exceeds 25%

✅ VA Loans

• Sellers can cover all closing costs

• Plus, contribute up to 4% in additional concessions (like paying off debts or funding fees)

✅ USDA Loans

• Seller concessions capped at 6% of the home’s sale price

🕰️ When Should You Ask for Seller Concessions?

It’s important to time your request strategically. You’ll have more leverage when:

• It’s a buyer’s market

• The home has been listed for a while

• You’re dealing with expensive repairs after inspection

• You’re low on funds for closing

Avoid asking for concessions in competitive scenarios like:

• A hot seller’s market

• Homes with multiple offers

• Properties already priced below market value

Your real estate agent can assess the situation and help you determine the right approach.

Are Seller Concessions Worth It?

Absolutely — when used wisely, seller concessions can help lower your upfront costs and make homeownership more accessible. While they’re not right for every situation, understanding how seller concessions work gives you greater control during negotiations and a better shot at sticking to your budget.