In Real Estate, what are seller concessions in a Real Estate Contract?

In Real Estate, seller concessions refer to costs that the seller agrees to pay on behalf of the buyer to help reduce the buyer’s out-of-pocket expenses at closing. These are negotiated as part of the purchase contract and are typically expressed as either:

• A specific dollar amount (e.g., “Seller to contribute $5,000 toward buyer’s closing costs”), or

• A percentage of the purchase price (e.g., “Seller to contribute up to 3% toward buyer’s closing costs and prepaids”).

🔍 What Seller Concessions Can Cover

Common allowable concessions include:

• Closing costs: lender fees, title insurance, escrow fees, and attorney fees.

• Prepaid expenses: property taxes, homeowners insurance, HOA fees, or prepaid interest.

• Discount points: to “buy down” the buyer’s mortgage interest rate.

• Home warranty: coverage for systems/appliances for the first year.

• Repairs or credits: if the buyer agrees to take a credit instead of asking the seller to fix something before closing.

⚖️ Why Sellers Offer Concessions

• To make the property more attractive in a competitive market.

• To help a buyer qualify for financing if they have limited cash for closing.

• To close faster by resolving negotiation issues like inspection findings or appraisal gaps.

🚫 Limits and Restrictions

Most loan programs (FHA, VA, USDA, Conventional) have maximum concession limits, for example:

• Conventional (primary residence): up to 3% of purchase price if the buyer puts less than 10% down.

• FHA loans: up to 6%.

• VA loans: up to 4% (some exceptions apply).

Concessions cannot be used for down payment—only for closing costs or prepaid items.

📝 Example Clause in a Contract

“Seller agrees to contribute up to $7,500 toward Buyer’s closing costs, prepaid items, and/or discount points. Any unused portion shall revert to Seller.”