When buying or selling a home everyone wants to get the best deal. As a buyer, you want to keep your costs down—and as a seller, you aim to sell quickly and at a good price. One way to make both sides happy is through seller concessions—an incentive that sellers offer to help ease some of the costs for buyers. These concessions can make a big difference in closing the deal. Let’s explore everything you need to know about seller concessions: what they are, who they benefit, how they work, and when to use them.
Seller concessions are essentially financial incentives that the home seller offers to the buyer to help cover some of the costs associated with purchasing the property. Think of it as a little extra help from the seller to make the home more affordable.
These concessions can cover expenses such as:
Both buyers and sellers can benefit from seller concessions, but in different ways. For buyers, concessions can lower upfront costs, making homeownership more accessible. If you’re a first-time home buyer or are tight on cash, seller concessions can be a game-changer, helping you cover some of those intimidating fees and costs.
For sellers, offering concessions can make your property stand out in a competitive market. If the house has been on the market for a while or needs some updates, concessions can be the nudge that encourages buyers to make an offer.
Recent changes in the real estate world have slightly altered how seller concessions can be used, particularly following the National Association of Realtors (NAR) settlement. One critical update is that "seller concessions cannot be limited to or conditioned upon the retention or payment to a cooperating broker, buyer, broker, or other buyer representative."
This means that concessions are meant solely for the buyer's benefit and can't be used as a backdoor way to compensate agents or brokers involved in the deal. It’s a reminder that the focus of these concessions should always be on making the home purchase easier for the buyer.
Seller concessions are great, but they aren’t unlimited. Different loan types have specific caps on how much sellers can contribute:
Primary Residences & Second Homes: If the buyer puts down less than 10%, the seller can contribute up to 3% of the purchase price. If the down payment is between 10% and 25%, the limit goes up to 6%. For down payments over 25%, the seller can contribute up to 9%.
For investment properties, the limit is capped at 2%, regardless of the down payment.
The seller can contribute up to 6% of the home’s purchase price toward the buyer’s costs.
Seller concessions are capped at 4% of the purchase price but can be used in a broader way, such as paying off the buyer’s credit card debt to qualify for the loan.
There’s no set percentage limit, but the concessions must be “reasonable” and cannot exceed the actual costs.
Understanding these limits is crucial so you don’t end up asking for or offering more than the loan guidelines allow.
Here are some strategic ways to use seller concessions:
Seller concessions are a valuable tool for buyers to make homeownership more affordable and for sellers to attract buyers in a competitive market. Knowing the limits and recent rule changes can help both sides use concessions to their advantage. Ready to see how seller concessions can work for you? Talk to a Churchill Mortgage Home Loan Specialist today to explore your options!