Real estate concessions are anything a seller agrees to give up in a deal to help it close. Most often that’s a credit toward the buyer’s closing costs, but a concession can also be a repair credit, a rate buydown, a home warranty, or a straight price cut. It’s a negotiating tool that moves money or work from one side of the table to the other. How much room you have to ask depends on the market, and when the concession is a closing-cost credit, on the buyer’s loan type.
The Main Types of Concessions
“Concession” encompasses a range of things a seller can offer. The most common:
- Closing-cost credit. The seller pays part of the buyer’s closing costs and prepaid expenses. This is the classic seller concession, and the amount allowed depends on the loan.
- Repair credit. Instead of doing repairs before closing, the seller credits the buyer to handle them afterward.
- Rate buydown. The seller funds a temporary or permanent reduction in the buyer’s interest rate, which lowers the monthly payment. See our guide to a seller-funded rate buydown. For a specific type, see how a temporary rate buydown works.
- Home warranty. The seller pays for a warranty that covers certain systems and appliances after closing.
- Price reduction. The seller lowers the sale price outright. Related, but it works differently from a credit (more on that below).
For the exact dollar limits on a closing-cost credit, which vary by loan program and down payment, see the seller concession limits by loan type.
Concession vs. Price Reduction
These two get mixed up, and they solve different problems. A price reduction lowers the sale price, which reduces the loan amount and shows up in comparable sales in the neighborhood. A concession keeps the price and instead credits the buyer at closing, freeing up cash rather than shrinking the loan. A concession can even come with a higher price if the seller raises it to offset the credit. One lowers what you borrow; the other lowers what you bring to closing.
How to Negotiate Real Estate Concessions
Market conditions set the tone. In a buyer’s market, where there are more homes than buyers, sellers are more willing to offer concessions to get a deal done. In a seller’s market with tight inventory, concessions are harder to come by, and a seller may agree only if the price goes up enough to cover the credit.
Two things keep a concession from backfiring. The appraisal has to support the price, so if a seller raises the price to fund a large credit and the home doesn’t appraise at that price, the buyer covers the gap in cash. And the total credit can’t exceed the buyer’s actual closing costs, so an oversized ask just leaves money on the table. Buyers commonly direct a concession toward whatever matters most in their situation, whether that’s cash at closing, a lower payment through a buydown, or repairs handled before move-in.
When a Concession Gets Deducted From the Price
There’s a line worth knowing. If a credit exceeds the loan program’s limit, or takes the form of a non-realty giveaway such as furniture, a car, or moving costs, guidelines treat the excess as a sales concession and subtract it from the sale price when calculating loan-to-value. Fannie Mae’s guidelines spell this out. The practical takeaway: keep the concession inside the program limit and the buyer’s real closing-cost total, or it stops adding value.
Where Your Agent and Lender Come In
A good agent knows what’s customary in the local market and how to structure the ask so it lands. The lender matters just as much on timing. Every credit in the deal, from the seller, the agent, or the lender, has to fit under the buyer’s total closing costs. Looping in the lender before the offer goes in keeps a large seller credit from colliding with an existing lender credit and forcing a last-minute restructure.
For more on how a lender credit works alongside seller concessions, see our guide.
Frequently Asked Questions
What is a real estate concession?
A real estate concession is anything a seller agrees to give up to help close a sale. It usually means a credit toward the buyer’s closing costs, but it can also be a repair credit, a rate buydown, a home warranty, or a price reduction.
What types of concessions can a buyer ask for?
Common requests include help with closing costs, a credit for repairs found during inspection, seller-funded rate buydowns to lower the payment, and a home warranty. What’s realistic depends on the local market and the seller’s motivation.
Are concessions the same as a price reduction?
No. A price reduction lowers the sale price and the loan amount. A concession keeps the price and credits the buyer at closing, which frees up cash instead of shrinking the loan. A concession can even come with a higher price if the seller raises it to offset the credit.
Can you get concessions in a seller’s market?
It’s harder. When inventory is tight, sellers have less incentive to offer concessions, and any credit may be offset by a price increase. In a buyer’s market, sellers are far more open to them.
Put Concessions to Work in Your Offer
Concessions are one of the more flexible tools in a purchase, as long as they’re sized to the market and the buyer’s actual costs. The type to ask for depends on what you need most, and the dollar limit on a closing-cost credit depends on the loan.
Thinking through an offer and what to ask the seller for? Reach out to JVM Lending to get pre-approved and build an approach that fits your loan.
