When you’re a new home buyer, you learn a lot of things fast, including new terms, negotiating skills, and, of course, the virtue of patience. One new term you may come across during your home buying journey is “seller concessions.” More often than not, this term is usually brought up sometime in the course of negotiations between the buyer and the seller.
In this article, we’ll teach you everything you need to know about seller concessions, including when to ask for them.
Seller Concessions – A Quick Definition
Sometimes referred to as a “seller credit” or “seller contribution,” a seller concession is when the seller of a home agrees to pay for some of the buyer’s closing costs.
How Buyers Benefit from Seller Concessions
Buyers benefit from seller concessions because they free up funds that the buyer would have had to use on the closing of their loan. Now, the buyer can use those funds towards other expenses. Often, seller concessions are used to pay for:
- Moving costs
- Home improvements
- Repairs to the home that may or may not have been brought up by the inspection
- New furniture or appliances
- Landscaping costs or tools
How a Seller Benefits
If a seller is trying to sell their home quickly, then it may benefit them to agree to a seller concession. They may be buying another home or need to pay for medical expenses. In this case, it may be in their best interest to agree to the concessions instead of waiting for another buyer to come along. Even then, there’s no guarantee that they’ll get a better offer. Sellers are more likely to agree to concessions in a buyer’s market. A seller’s market is a different story, and the seller may decide to say no or wait for a better offer.
When to Ask for a Seller Concession
Usually, a buyer will ask for a seller concession if:
- It’s a buyer’s market or the seller is having difficulty selling their home.
- The home inspection revealed costly repairs or improvements that the buyer will have to pay for in the near future.
- The appraisal came in lower than the purchase price.
- The buyer cannot afford the closing costs, but wants to purchase the home anyway.
Usually, a seller concession is requested when the buyer puts in an offer or later on, when the home is already under contract.
As a new home buyer, this is probably all new information, which can be overwhelming. If you’re not sure whether or not you should ask for a seller concession, you may want to talk to your real estate agent. They should be able to point you in the right direction. Also, make sure that the amount complies with what’s required by your lender. Usually, there is a limit as to how much a seller can pay towards closing costs.
Have Questions? We’d Love to Chat!
If you’re a new home buyer and have questions about seller concessions or the buying process in general, please do not hesitate to reach out. We’d be happy to chat and provide you with additional information.