What Seller Concessions Should I Expect?
When an offer comes in, the buyer may ask you to contribute toward certain costs associated with their purchase. Seller concessions are negotiable, and understanding how they affect the overall offer can help you decide how you'd like to respond.
You receive an offer at the price you were hoping for.
Great news.
Then you notice another line in the offer:
The buyer is asking the seller to pay $10,000 toward their closing costs, prepaids, or other allowable expenses.
Does that mean you're actually getting $10,000 less?
Do you have to agree to it?
Should you reject the offer?
Not necessarily.
A request for seller concessions is simply one of the financial terms of the offer, and we'll evaluate it along with the purchase price and everything else the buyer is proposing.
Quick Takeaways
Seller concessions are negotiable.
You aren't automatically required to agree to a buyer's request for concessions.
Concessions can affect your estimated proceeds from the sale.
A higher-priced offer with concessions isn't necessarily better—or worse—than a lower-priced offer without them.
The buyer's financing may limit what concessions can be used for and how much is permitted.
Concessions can sometimes be used toward allowable closing costs, prepaids, or financing-related expenses.
We look at the entire offer before recommending how you might respond.
Team Martin will help you understand how requested concessions affect the financial picture of an offer.
What Are Seller Concessions?
Seller concessions generally refer to costs the seller agrees to pay or contribute toward on behalf of the buyer as part of the negotiated transaction.
Depending on the buyer's financing, the contract, and what is permitted, a buyer may request a seller contribution toward allowable expenses such as:
Certain closing costs
Prepaid expenses
Discount points or an interest-rate buydown
Other allowable buyer costs
The exact use of the concession can depend on the buyer's loan program and lender requirements.
The important thing for you as the seller is understanding how much the buyer is asking you to contribute and how that affects your side of the transaction.
Do I Have to Pay the Buyer's Closing Costs?
No.
A buyer can ask for a seller contribution in an offer.
You can then consider that request along with the rest of the offer.
Depending on the circumstances, you may decide to:
Accept the offer as written
Counter the amount of the requested concession
Counter other terms of the offer
Decline the offer
Seller concessions are part of the negotiation.
The fact that a buyer requests them doesn't mean you've already agreed to pay them.
How Do Concessions Affect My Proceeds?
This is one of the most important things to understand.
Suppose a buyer offers:
$400,000 purchase price
$10,000 seller concession
If you agree to both terms, the $10,000 contribution is an expense to you at closing, subject to the contract and actual allowable costs.
So we don't want to look at the $400,000 purchase price by itself.
We'll consider the concession along with the purchase price and your other estimated selling expenses when helping you understand the financial picture.
Why Would a Seller Agree to Concessions?
Because sometimes the overall offer still makes sense.
A buyer may have sufficient funds for their down payment but want assistance with closing costs or may want to use a concession toward an allowable interest-rate buydown.
For the seller, the question isn't simply:
“Why should I pay the buyer's expenses?”
A more useful question is:
“Do the overall terms of this offer work for me?”
If they do, agreeing to a concession may make sense.
If they don't, you can negotiate.
Can a Buyer Increase the Price and Ask for a Concession?
Yes, a buyer may structure an offer with a higher purchase price while also requesting a seller concession.
For example:
Offer A: $400,000 with no seller concession
Offer B: $410,000 with a $10,000 seller concession
At first glance, those may appear financially similar from the seller's perspective.
But there are additional considerations.
If the buyer is financing the purchase, the property may need to appraise at the agreed purchase price depending on the financing and contract terms.
There may also be limits on how much the seller is permitted to contribute based on the buyer's loan program and other factors.
That's why we don't simply add the requested concession to the price and assume everything works.
We'll look at the entire structure of the offer.
Are There Limits on Seller Concessions?
There can be.
The amount and types of costs a seller can pay may be affected by the buyer's loan program, down payment, lender requirements, applicable rules, and the terms of the transaction.
Those requirements can change, and they aren't something we want to guess about.
When necessary, we'll work with the buyer's agent and lender to make sure the requested concession is structured appropriately for the buyer's financing.
What If the Buyer Doesn't Use the Entire Concession?
This depends on how the concession is written in the contract and what costs are actually permitted.
A seller contribution generally isn't intended to become cash handed directly to the buyer simply because the full amount isn't needed.
The lender and closing professionals will determine what can actually be applied under the buyer's financing and the contract.
If the exact wording of a concession is important to your decision, we'll make sure you understand what you're agreeing to before you sign.
Are Concessions More Common in Some Markets Than Others?
Yes.
What buyers request can change with market conditions.
When sellers have significant negotiating leverage, buyers may be less likely to have large concession requests accepted.
When buyers have more choices and sellers are competing for their attention, concession requests may become more common.
Price range and property type can matter too.
Rather than assuming a concession request is unusual or unreasonable simply because one appears in an offer, we'll look at what's happening in your current market and evaluate the complete offer.
Can I Offer Concessions Before I Receive an Offer?
Sometimes sellers choose to advertise that they're willing to consider a contribution toward buyer costs.
Whether that makes sense depends on the property, market conditions, pricing strategy, and your goals.
It isn't something every seller needs to do.
If we think advertising an available seller concession could be useful as part of your listing strategy, we'll discuss it with you first.
You decide whether you want to offer it.
Should I Agree to a Concession or Reduce My Price Instead?
Those aren't necessarily interchangeable.
A price reduction changes the advertised purchase price of the property.
A seller concession contributes toward certain buyer expenses within a transaction.
Depending on the buyer, one may be more useful than the other.
We'll look at what the buyer is requesting, your estimated proceeds, market conditions, and the rest of the offer before discussing your options with you.
Look at Your Estimated Net, Not Just the Offer Price
When you're comparing offers, one of the things we'll help you consider is how the financial terms may affect your estimated proceeds.
For example, two offers might have different:
Purchase prices
Seller concessions
Requested seller-paid expenses
Closing arrangements
Other financial terms
The highest purchase price doesn't necessarily produce the highest estimated proceeds.
And the offer with the highest estimated proceeds isn't automatically the best choice if other terms are important to you.
That's why we keep coming back to the same principle:
Look at the whole offer.
The Bottom Line
If you only remember one thing from this article, let it be this:
A request for seller concessions is a negotiation—not an automatic expense you have to accept.
We'll look at how much the buyer is requesting, what the concession is intended to cover, how it affects the overall offer, and what the rest of the terms look like.
Then you can decide whether accepting, rejecting, or countering the request makes the most sense for you.
From Dana & John
When sellers first see a request for closing costs or other concessions in an offer, it's easy to focus immediately on that number.
We want to help you look at the bigger picture.
We'll go through the offer with you, explain what the buyer is requesting, and help you understand how it may affect your estimated proceeds. Then we'll look at the price and all of the other terms together.
Sometimes a concession makes sense. Sometimes we may recommend negotiating it. Either way, you won't have to figure out what that line in the offer means by yourself.
Continued Learning
Want to understand more about offers and negotiations?
→ How Do I Choose the Best Offer?
→ What Should I Know About Multiple Offers?
Have Questions?
If you're preparing to sell and have questions about seller concessions, closing-cost requests, or how they'll affect an offer, we'd be happy to explain how these terms work and help you understand what to expect when offers start coming in.
Dana & John Martin – Team Martin
Waters Edge Realty
318-504-9925 | 504-450-2714
ALGulfCoastAgents@gmail.com
