Seller concessions are incentives that a home seller offers to help cover a buyer’s expenses, typically closing costs or other fees associated with a real estate transaction. Negotiated during the purchase agreement, concessions can be structured as either a flat dollar amount or a percentage of the property’s sale price.
What Costs Can Seller Concessions Cover?
Seller concessions are typically used for closing-related expenses, such as:
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Appraisal and loan origination fees
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Title and inspection fees
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Recording costs and prepaid property taxes
Some sellers also offer other concessions, including:
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A home warranty
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Mortgage interest rate buydowns
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Repairs identified during inspection
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Moving expenses or HOA fee coverage
Benefits of Seller Concessions for Buyers and Sellers
For Buyers:
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Lower upfront costs: Closing costs are a certain percentage of the property price; Concessions can reduce or eliminate expenses from closing costs.
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Greater affordability: Especially useful for first-time buyers, freeing up cash for down payment or other expenses.
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Fewer repairs/contingencies: With repairs addressed via concessions, buyers might face fewer post-closing surprises.
For Sellers:
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More attractive listing: Especially valuable in a slowing market, concessions can help entice buyers.
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Faster closings: Sellers who need to relocate or sell quickly may offer concessions instead of price reductions.
When Concessions Are Most Effective
Seller concessions are a flexible tool, but they’re most impactful in certain situations where they can either attract buyers or help keep a deal moving forward. Here are the scenarios where concessions tend to make the biggest difference:
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Slow or Buyer’s Market: When inventory is high and competition among sellers is strong, concessions can make a property more attractive and help it sell faster.
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Longer Market Time: Homes that have been sitting on the market may benefit from concessions as a way to spark new interest and reduce buyer hesitation.
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Limited Cash for Buyers: Many buyers may be short on cash after saving for a down payment. Concessions can ease the burden by covering closing costs or repairs, making the purchase more feasible.
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After an Inspection: If an inspection uncovers significant issues, sellers can offer concessions instead of making repairs themselves. This compromise often keeps negotiations on track and prevents deals from falling apart.
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Competitive Offers: Buyers may use concessions as a bargaining chip when competing in multiple-offer situations, helping their offer stand out without raising the purchase price.
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Preserving Reserves: Buyers who want to keep cash available for renovations or an emergency fund can use concessions to roll closing costs into their loan.
Seller concessions are equally useful for easing buyer burdens and accelerating sales for sellers. With careful negotiation and market awareness, concessions can help buyers manage upfront costs while giving sellers an edge in closing the deal.
