Seller Concessions: What is it and how are they used?

Seller concessions, also known as seller contributions or closing cost assistance, are negotiated adjustments in a real estate transaction where the seller agrees to cover some of the buyer’s closing costs or other expenses. These concessions can make the transaction more attractive to the buyer and may help the seller to close the deal more quickly. Common uses of seller concessions in a real estate transaction include:

  1. Closing costs: These are fees and expenses associated with finalizing a real estate transaction. Examples include loan origination fees, appraisal fees, title insurance, and attorney fees. Seller concessions can help cover a portion or all of these costs for the buyer.
  2. Prepaid items: These are expenses that are paid in advance, such as property taxes, homeowners’ insurance, and mortgage insurance premiums. Seller concessions can be used to cover these costs for a certain period, usually a few months or up to a year.
  3. Discount points: Discount points are fees paid upfront to reduce the interest rate on a mortgage. A seller concession can be used to pay for some or all of the discount points, effectively lowering the interest rate for the buyer.
  4. Home repairs or improvements: Sometimes, a home inspection reveals issues that need to be addressed before the sale can be finalized. In this case, a seller concession can be negotiated to cover the cost of necessary repairs or improvements, either by providing a credit at closing or by the seller completing the work before closing.
  5. HOA fees: If the property is part of a homeowners association (HOA), there may be fees and dues associated with membership. A seller concession can be used to cover these fees, either as a one-time payment or for a specific duration.
  6. Temporary housing or moving expenses: In some cases, a seller concession may be used to assist the buyer with short-term housing or moving expenses, particularly if the buyer needs to move before the closing date.

It’s important to note that seller concessions are subject to lender approval and may be limited by the type of loan, loan-to-value ratio (LTV), and other factors. Additionally, concessions should be clearly stated in the purchase agreement, and both the buyer and seller should consult with their respective real estate agents and attorneys to ensure they understand the terms and implications of any concessions being offered.

If you have more questions on seller concessions, you can email Luigi at [email protected].