Can Seller Concessions Cover Your Closing Costs?
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When buying a home, a seller concession lets the seller contribute toward your upfront costs—most commonly closing fees, prepaid, or even minor repairs. Instead of only negotiating purchase price, buyers can ask sellers to credit a portion of the sale price to help with expenses like title insurance, appraisal fees, or property taxes due at closing.
Here’s how seller concessions work in practice:
- Credit at closing: The seller agrees to pay a set dollar amount or percentage of the sale price toward your closing costs. For example, on a $300,000 home, a 3% concession equals $9,000.
- Loan program limits: Lenders cap concessions based on your loan type and down‑payment amount. Typical maximums are:
- FHA loans – up to 6% of purchase price
- VA loans – up to 4%
- Conventional loans – 3% to 9% depending on down payment
- Expense eligibility: Concessions usually cover allowable costs such as title fees, recording fees, appraisal, and escrow charges. They cannot be applied toward down payment or paid directly to the buyer as cash back.
- Negotiation strategy: Sellers may accept concessions in lieu of a price reduction, especially in slower markets or if the home has been listed for a while.
Understanding the limits and benefits of seller concessions can significantly reduce the cash you need at closing. A clear estimate of closing costs—often 2% to 5% of the loan amount—helps determine how much concession to request. For details on allowable fees under different programs, refer to official guidelines like those from the U.S. Department of Housing and Urban Development.
Before requesting seller concessions, it’s advisable to consult your lender and real estate agent. They’ll verify how much credit your loan program permits and ensure your offer remains competitive. With a well‑structured concession request, you can lower your out‑of‑pocket expenses and close on your new home with greater financial flexibility.
