The short version
- A seller concession is money the seller agrees to put toward your closing costs. It lowers the cash you need to close, not the price.
- Every loan type caps how much a seller can contribute. Your lender will know your exact limit.
- Concessions can pay for closing costs, prepaid items, and rate buydowns. They can't come back to you as cash.
- In a slow market they're easy to get. In a bidding war they can cost you the house.
A lot of my buyers have the income for the payment but are tight on cash for closing. That's exactly what seller concessions are for. Used well, they can save you several thousand dollars at the closing table. Used at the wrong time, they can make your offer the first one the seller throws out. Here's how I explain it to clients.
What a concession actually is
It's a credit from the seller toward your closing costs, written into the contract. Say you're buying at $350,000 and you ask for $7,000 in concessions. At closing, $7,000 of the seller's proceeds goes toward your lender fees, title charges, prepaid taxes and insurance. You bring $7,000 less to the table. The seller nets $7,000 less. That's the whole mechanism.
How much you can ask for
- Conventional loans: the cap depends on your down payment. Roughly 3% of the price with less than 10% down, 6% with 10 to 25% down, and 9% above that. Investment properties are capped lower.
- FHA loans: up to 6% of the price.
- VA loans: the seller can pay your normal closing costs, plus up to 4% toward certain other items.
- USDA loans: up to 6%.
- One rule across all of them: the credit can't be more than your actual costs. Any extra doesn't come back to you as cash.
These limits get updated, and lenders have their own overlays. Ask your loan officer for your number before you write the offer.
What concessions can pay for
Lender fees, title and settlement charges, the appraisal, prepaid property taxes and homeowners insurance, and HOA transfer fees. One use that's gotten popular: a rate buydown. The seller's credit pays to lower your interest rate, either permanently or for the first couple of years. On the right deal, a buydown is worth more to you than the same dollars off the price, because it lowers your payment every month.
When to ask, and when not to
If the house has been sitting for 45 days, ask. The seller is motivated and a concession is cheaper for them than another price cut. If it's a new listing with three offers on it, a concession makes yours the weakest one on the table. In that case I'd rather you offer clean and find the cash another way, or look at a house with less competition. One more thing: if you raise your offer price to cover the concession, the house still has to appraise at that higher number. I check the comps before we try it.
Real estate done right starts with a conversation.
Buying, selling, or investing anywhere in Central Florida — Adam picks up, answers straight, and never hands you off.
