Seller Concessions Explained: A Smart Guide for Buyers and Agents
In today’s housing market, seller concessions are a powerful tool to help first-time homebuyers, move-up buyers, and real estate agents structure affordable deals. Whether you’re navigating closing costs or trying to lower a buyer’s monthly payment, concessions can make or break an offer — especially when used strategically.
What Are Seller Concessions and Buyer Concessions?
Seller concessions are contributions from the seller toward the buyer’s closing costs or prepaid expenses. They are often negotiated during the offer process to ease the financial burden on the buyer.
Buyer concessions, on the other hand, refer to incentives offered by the buyer (such as higher offers or waived contingencies) to make their bid more attractive — but this article focuses primarily on seller-side concessions.
Key Term: In most cases, “concessions” refers to seller-paid closing cost assistance, not buyer-side incentives.
What Can Seller Concessions Cover?
Seller concessions can be used to pay for a wide variety of costs that buyers would otherwise cover out of pocket at closing, including:
- Loan origination fees
- Title insurance
- Appraisal fees
- Attorney fees
- Recording fees
- Discount points to buy down interest rates (e.g., for a 2-1 buydown loan)
- Escrows for taxes and insurance
- HOA transfer fees
- Lender-required repairs
For a full list of other out-of-pocket expenses, check out our Maryland closing cost guide.
Loan-Specific Seller Concession Limits
The maximum amount of seller concessions allowed depends on your loan type and down payment. Here’s a quick comparison:
Loan Type | Max Seller Concessions | Notes |
|---|---|---|
FHA | Up to 6% of purchase price | Applies regardless of down payment size |
VA | Up to 4%, plus closing costs | Can include prepaids, points, even debt payoff |
USDA | Up to 6% of purchase price | Often covers most or all of buyer’s out-of-pocket costs |
Conventional (≤10% down) | 3% | Must be a primary residence |
Conventional (10–25% down) | 6% | Increased flexibility with higher down payment |
Conventional (≥25% down) | 9% | Ideal for move-up buyers with more equity |
When and Why Are Seller Concessions Used?
Seller concessions are most commonly used in:
- Buyer’s markets, where sellers need to sweeten the deal
- High interest rate environments, to buy down the rate
- Low-cash situations, where buyers need help covering upfront costs
- First-time buyer programs, which often allow combining concessions with assistance
For help stacking programs, see our guide to first-time buyer incentives in Maryland.
Seller Concessions vs Price Reduction: Which Is Better?
Let’s compare two scenarios on a $400,000 home to see which strategy provides more buyer benefit:
With $10K Seller Concession | With $10K Price Drop | |
|---|---|---|
Purchase Price | $400,000 | $390,000 |
Down Payment (5%) | $20,000 | $19,500 |
Interest Rate | 6.5% (bought down to 6.125%) | 6.5% |
Monthly Payment | ~$2,311 | ~$2,373 |
Cash Needed at Closing | $8,500 (after concession) | $18,000 |
In this example, the concession saved over $9,000 in upfront costs and lowered the monthly payment by about $60.
Tips for Negotiating Seller Concessions This Year
- Get preapproved early with no credit check — model how concessions will help
- Know your loan program’s limits and plan within them
- Include your ask in the initial offer, not just after inspection
- Use concessions for rate buydowns or repairs, not just closing fees
- Time your offer for leverage — like after a price reduction or long days-on-market listing
We’ll help you structure the best use of seller concessions based on your specific loan and market.
FAQs About Seller Concessions
-
Are FHA seller concessions different from other loan types?
Yes. FHA allows up to 6%, which is more generous than most conventional loans under 10% down.
-
What can’t seller concessions cover?
They can’t be used toward the down payment or to exceed actual closing costs.
-
Will concessions affect appraisal or underwriting?
They can — large concessions must be customary for the market and within allowable limits.
Ready to explore your options?
Seller concessions are a flexible, underused strategy that can drastically reduce out-of-pocket costs and improve loan affordability — without requiring a price cut. Whether you’re advising clients or buying your first home, knowing how and when to use concessions gives you a competitive edge. Let our mortgage experts review your seller credit strategy before you submit an offer.
Start My Application
