Understanding a Seller Concession

 

A seller concession is amount offered by a seller to a buyer to use towards their closing cost or pre paid items. Prepaid items include amounts used for taxes, insurance and first month’s payment. A seller concession is allowed on most loan products. FHA loans allow seller concessions of up to 6% of the sales price. VA loans allow seller concessions up to 4% and conventional loans offer up to 3%.

A seller concession occurs when a seller agrees to give back to the purchaser an agreed amount up to or below the limit of the borrowers loan type. The incentive for the seller is to offer terms that borrowers are easier to qualify for, to speed up the home selling process and gives the buyers an incentive to buy.

If you are a buyer and you are asking a seller for concessions it is best to ask right away in you initial offer. Many Buyers can benefit from seller concessions as closing cost and down payments can add up to more than most buyers expect. A seller concession paired with a down payment assistance loan or grant can help buyers get in to homes with little out of pocket.

The borrower still has to come to closing with the minimum contribution required by their loan product but everything else can be covered with a seller concession.