The Benefits and Disadvantages of Seller Concessions

by Tony Carter, Realtor® 08/29/2021

Image by Sephelonor from Pixabay

Buying a home is a complicated transaction with many expenses. Part of the transaction involves closing costs, which vary in amount depending on the situation. One way to reduce the closing costs for the buyer is to ask for a seller concession so that the seller pays a portion of the closing costs instead. Even though this results in the seller spending more money on the transaction, there are some key reasons seller concessions can benefit both parties.

Types of Seller Concessions

A lot of individual expenses add up to make the final closing cost on a home purchase. Some concession requests or offers will pay for one or more specific costs, while others will be a percentage of the overall amount. Some of the individual expenses commonly involved in seller concessions are repairs, property tax, loan fees and homeowners’ insurance fees. The buyer can include a concession request in their offer or the seller can introduce them to help negotiate. It’s important to note that there are limits on seller concessions determined by the type of loan the buyer has.

Concession Benefits

Concessions have an obvious benefit for the buyer. A concession can mean less money required upfront when making a purchase. Closing costs typically combine to equal about 2 to 5% of the total purchase price, so anything that can reduce the amount is a bonus for the buyer.

Concessions can actually benefit the seller in certain situations as well. The biggest advantage is that they can speed up a transaction and entice buyers to purchase sooner. If a seller is having trouble closing the deal on their old home too long after moving into their new one, the result can be extremely costly. A concession can speed up the process to help avoid the risk of double mortgage payments. Concessions can also help a seller negotiate with a buyer who won’t budge on a low offer or to gain an edge in a competitive seller’s market. Discuss your options with a real estate agent or other professional to determine the best strategy.

Concession Disadvantages

As a buyer, requesting seller concessions in a competitive buyer’s market means you risk your offer being rejected. If there are multiple offers on a home, the seller is more likely to agree with a buyer who will put up more cash up front rather than ask for a concession. Concessions can cause issues for the buyer in the long-term, as well. Seller concessions get added in to your mortgage total which can increase your monthly payments. This also means you will pay more interest over the term of the loan. It’s important to weigh the long-term effects before making the request.

Concessions can help you both as a buyer and seller, but those benefits will always depend on your individual situation. Always consult a financial advisor to help you decide if requesting or offering seller concessions as part of your home transaction is right for you.

About the Author

Tony Carter, Realtor®

My wife, Cindy and I, moved to Florida 9 years ago from Wisconsin, where we were born and raised. I proudly served in the United States Air Force and was stationed overseas and in The Gulf War. Became a member of The American Legion and a lifetime member of Veterans of Foreign Wars (VFW). After, the Military, I got into the retail business for the last 25 years. During my last position, in the retail. I was second-in-charge of a 125 million dollar a year business. Thatis where I developed my passion for customer service and taking care of the customer. With that passion, I became a full-time licensed Realtor in the state of Florida. I understand that real estate is not just a transaction but an important personal decision, a decision that may need guidance. I am here to answer any questions and guide you and your family through the process. Whether buying for the first time. Purchasing a condo, single-family home, investment property or a time-share on the beach. I am the exclusive Realtor for the Mariner Beach Club in St Pete Beach, Florida and for the Island Gulf Resort in Madeira Beach, Florida. Please feel free to contact me with your real estate needs directly at cell 262-894-8135 or via e-mail at [email protected] or website; Timeshare on St. Pete Beach, Florida. Video of the Mariner Beach Club, St. Pete Beach, Florida. Website to the timeshare at Madeira Beach, Florida.