Buying and selling real estate can involve many complex negotiations. Buyers and sellers generally pay for their own closing costs, but everything is negotiable. Seller concessions can be a part of the conversation when buyers are looking to get the best deal or when sellers are looking to maximize profits and speed up the sales process.
Home seller concessions involve the seller offering to pay for some or all of the buyer’s closing costs or other expenses associated with the purchase of a home. Closing costs will vary depending on your specific situation and can range from 2%-5% of the property's market value. Many first time homebuyers aren’t aware of the additional costs that come into play when buying a home, and concessions can help ease the total bill. When you apply for a home loan, the lender will provide a loan estimate which details the closing costs associated with the loan. You can discuss with your agent if there are any costs you want the seller to cover. Seller concessions can include covering fees such as:
- Title insurance
- Origination fee
- Property taxes
- Recording fees
- Attorney fees
- Mortgage points
Seller concessions can also include things like the cost of repairs noted in the home inspection report or the inclusion of personal property such as televisions or furniture. For example, if the home inspection report stated that the water heater is at the end of its lifespan, the seller could offer a $5,000 concession to cover the cost of the repair.
Concessions can in fact benefit both the buyer and seller. Buyers and sellers must understand the type of market they are working in and an agent can help navigate. If it’s a slow market, or considered a buyer’s market, a good way to attract buyers is negotiating with concessions to help close the deal. If a house has been sitting on the market for more than a few weeks, it could be a good time for sellers to discuss concessions with potential buyers. This can also help those who might not have enough cash on hand to cover all of the closing costs and make the purchase more affordable.
As a buyer in a market with properties getting multiple offers, sellers will often disregard offers with contingencies or requests. Sellers will want to accept the easiest and most straightforward offer. If you ask for too much, sellers will likely be put off.
Seller concessions are not the same as price reductions and are not interchangeable. Concessions can offer a short term break for a buyer at closing, but the buyer will still be responsible for the full mortgage (if there is one).
According to the NAR, nearly half of all real estate transactions in the last year included some type of concession. Concessions can certainly make a deal more attractive to buyers and can speed up the process for sellers, but it is essential to negotiate and agree upon the specifics before closing the sale. It’s best to put all of the details of the arrangement in writing and ensure that all parties are on the same page. If you’re ready to purchase a home, get started with our team today!