Seller Concessions: What Can A Seller Contribute To Their Home Sale?

What is a seller concession?

Buyers can request that the seller contribute to some of their out-of-pocket costs when submitting an offer on a home. If agreed upon, this is referred to as a seller concession. 

Why would a seller make concessions?

There are many reasons why a seller might choose to offer concession. For example, if the property has been on the market for a long time, the seller may be willing to provide concessions if they are motivated to sell the property quickly. A concession might also be offered to a buyer who is on the fence about committing, helping to sway them to purchase. Sellers are more inclined to make concessions in a buyers’ market, or in high-price/high-interest environments, versus a sellers’ market where they’re receiving multiple competitive offers.

Seller concessions often benefit both the buyer and the seller because they lower the cost for the buyer and help the seller increase demand and speed up the sale of their property.

Types of seller concessions:

• Out-of-pocket expenses: These can include a variety of fees such as appraisal fees, title fees, mortgage origination fees, property taxes, attorney fees, processing fees, discount points, inspection fees, insurance, HOA fees, and/or fees for pulling credit. These costs can add up quickly and can be a significant barrier to entry for many buyers. By agreeing to pay some or all of these costs, the seller can help the buyer get into the home without having to come up with a large amount of cash up front.
• Buydowns: Sellers can temporarily lower the interest rate through a seller-paid buydown. This can be a great way to make the property more affordable for the buyer. It also benefits the seller, as they can make their property more appealing to buyers without reducing the list price.
• Repairs: Offering concessions in the form of repairs that need to be made prior to the sale of the property. This can be particularly beneficial to buyers who may not have the financial resources to make these repairs themselves. 

How much can sellers contribute?

It’s important to note that seller concessions CANNOT exceed the buyer’s closing costs, and there are limits to how much a seller may contribute. Seller contribution guidelines vary by loan type:

• Conventional loans:
  • Maximum seller contribution set by Fannie Mae and Freddie Mac
  • 3-9% depending on down payment
  • 2% non-owner occupied
• FHA loans:
  • Maximum seller contribution set by the Federal Housing Authority
  • 6%
• VA loans:
  • Maximum seller contribution set by Veterans Affair
  • All regular closing costs, or discount points as appropriate for the market plus 4% of the sales price to include pre-paids, consumer debt and funding fee
• USDA loans:
  • Maximum seller contribution set by the United States Department of Agriculture
  • 6%
  • Closing costs can be financed up to 100% of appraised value

Overall, seller concessions can be a great way to help buyers overcome some of the financial barriers to entry into the real estate market. They can also be a great way for sellers to move their properties more quickly and to ensure that they get top dollar for their homes. If you are buying or selling a property, it is important to discuss your options for seller concessions with your real estate agent.

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Content provided by TowneBank Mortgage for informational purposes only. The information contained herein (including but not limited to any description of lending programs and products, eligibility criteria, interest rates, fees and all other loan terms) is subject to change without notice. This is not a commitment to lend. TowneBank Mortgage NMLS# 512138.