If you are in the process of buying a home, you may have heard the term “seller concessions” and wonder what that means. In a real estate transaction, seller concessions is money that the seller gives back to the buyer (concession) to cover certain buyer expenses. The concessions could be to cover some or all of the buyers closing costs (including taxes, insurance, HOA fees, etc) or to make repairs to the home.
When Do Sellers Offer Concessions?
Real estate transactions are a negotiation, and you can ask for seller concessions for a number of reasons. For example, when submitting an offer, your lender may suggest asking for concessions to cover your closing costs on a low down-payment loan. Also, you might do an inspection and find several items in need of repair and can ask the seller for a concession at closing. You’ll save that money at closing and complete the repairs later, which doesn’t delay closing. Sometimes in a buyers market, a seller may even offer a concession up front to replace the badly worn carpet and try to entice more buyers.
How Do I Get Seller Concessions?
Seller concessions are usually only given in a buyers market. After all, the money a seller provides to you means less money they receive. In a sellers market when homes are selling for way over asking price with multiple offers, the seller has all the negotiating leverage and concessions are rarely seen. However, in a shifting market and further into a buyers market, concessions become more common. Sellers who need to sell their house sense the market slowing so they are more likely to cover some of your closing costs or pay for repairs.
Consult your real estate agent and your loan officer about seller concessions. Depending on the particular home and the seller’s situation, they may or may not be willing to give any money up. If you are receiving concessions from the seller, your lender needs to know so they can factor that into your loan and closing documents. Make sure your real estate agent and lender are on the same page! We have seen situations where a buyer needed seller concessions to close on the home. The buyers agent didn’t talk to the lender and realize that so they wrote the offer without concessions. Ultimately it could not close without the seller contribution and the sellers would not change the contract and the deal died.
When in doubt, talk to your real estate agent about seller concessions. They can advise you on when you can ask for them, how much, and the likelihood of a seller providing them. Your loan officer will also provide you with the parameters for concessions specific to your loan type and financial situation.
Wesley & Co. has helped many clients negotiate real estate transactions with and without concessions and we’re here to guide you through the process. Please reach out with any questions.