When you buy a home, you expect the process to move smoothly. In reality, buying often comes with surprises. You go through preapproval, financing, inspections, and escrow, and issues can appear at any stage. A home inspection might uncover repairs that cost more than expected, or closing costs may end up higher than planned. Seller concessions help solve these problems.
A seller concession is an agreement where the seller helps cover some of the buyer’s closing costs. Think of it as a financial incentive that makes the transaction easier to complete. The goal is to reduce the buyer’s out-of-pocket expenses at closing.
How seller concessions work
Seller concessions do not involve handing cash directly to the buyer. Instead, both parties structure the agreement within the purchase contract. The seller agrees to pay certain costs on the buyer’s behalf, and those amounts appear on the closing statement.
For example, if an inspection reveals that part of the home does not meet current code requirements, the seller may agree to cover related costs. In another scenario, the seller may agree to pay closing costs if the buyer accepts a slightly higher purchase price. Both sides benefit when they structure the deal carefully.
What seller concessions can cover
Seller concessions can apply to many closing-related expenses, as long as they offset legitimate costs. Common items include mortgage-related fees, title insurance, title search fees, appraisal fees, inspection fees, escrow account setup, prepaid property taxes, and homeowner’s insurance costs. In some cases, sellers also agree to cover state or local transfer taxes.
Because these costs add up quickly, concessions can make a major difference for buyers who need help managing upfront expenses.
What seller concessions cannot cover
Seller concessions cannot cover a buyer’s down payment. Lenders require buyers to invest their own funds into the purchase to keep loans stable and reduce risk. Concessions must stay within lender guidelines and apply only to approved closing costs.
Limits on seller concessions
Loan programs set limits on how much a seller can contribute. Conventional loans usually allow seller concessions between 2% and 9% of the home’s sale price, depending on the buyer’s down payment. FHA, USDA, and VA loans typically allow seller concessions up to 6%.
These limits protect the housing market and prevent inflated prices that hide true costs.
Why getting concessions in writing matters
If buyers and sellers discuss concessions, they must put every agreed term in writing. Verbal agreements do not protect either party. Clear language in the purchase contract ensures everyone understands which costs the seller will cover and avoids confusion at closing.
Why seller concessions help both sides
Seller concessions can make a home more attractive and help it sell faster. For buyers, concessions lower upfront costs and make homeownership more achievable. When used correctly, concessions create win-win situations that keep deals moving forward and help both sides reach the closing table with confidence.
