What Are Seller Concessions? (And Why They Matter)
Seller concessions are when the seller chips in money to cover certain buyer costs — usually out-of-pocket stuff like lender fees, title insurance, inspections, and more. Think of it like this: The seller isn’t dropping the home price — they’re saying, “Hey, I’ll help cover what it costs to close this deal.”
So instead of needing $10K to close, you maybe only need $5K — because the seller’s picking up the rest. Here’s a short list of the usual suspects seller concessions can cover:
- Appraisal fees
- Inspection fees
- Loan origination fees
- Title insurance & title search
- Attorney fees
- Recording fees
- Prepaid taxes and insurance escrows
- Points to buy down the mortgage rate
Could you pay those yourself? Sure. But we’re trying to get strategic — and using seller concessions can open up serious opportunities.
Okay, But What’s a Price Reduction?
Simple: the seller cuts the home price. If it was listed at $350K, now it’s $340K. So your loan is smaller, and your monthly payment drops too. That’s solid, right?
But hang on… cause that $10K discount saves you about $50–$60/month with a 30-year loan. Not horrible… but what if the seller gave you that $10K toward closing instead? That’s where seller concessions vs. price reductions becomes a smart-money conversation.
Straight Talk: Which One Saves Me More?
If you’re tight on liquid cash (like most first-time buyers), seller concessions can be a game-changer. You put less money down upfront while keeping your long-term loan in check. Let’s run a quick example. No fluff. Just numbers.
| Scenario | Concession | Price Reduction |
|---|---|---|
| Home Price | $350,000 | $340,000 |
| Down Payment (5%) | $17,500 | $17,000 |
| Monthly Payment (est.) | $2,100 | $2,050 |
| Cash to Close | $10,000 | $15,000 |
With the price cut — yeah, the monthly is slightly lower. But you’re spending more cash upfront at closing.
With seller concessions — you keep $5K+ in your bank account day one. That’s leverage. That’s future upgrades. Emergency fund. Optionality.
When Seller Concessions Make the Most Sense
Here’s when I LOVE seller concessions vs. price reductions:
- You’re scraping to pull together the cash-to-close
- You want to keep more cash on hand after closing (new roof, who dis?)
- You’re getting an FHA or VA loan that limits your out-of-pocket
- You can negotiate rate buydowns with the concession (save more over time!)
I had a buddy, Tony — bought his first duplex with 3.5% down. He asked the seller for $8K in concessions, used it to buy down his rate and cover closing. Moved in cash-light but cash-smart.
Did it cut anything off the purchase price? No. But he was cash-flow positive from day one. That’s the move.
So next time your agent talks about seller concessions vs. price reductions — think strategy, not ego.
Big Picture: Loan Structure Matters
Sometimes price reductions can feel better because there’s this pride thing: “I scored a deal — got that price DOWN!”
But if you’re putting the home on an FHA 3.5% down loan or you’re tight on reserves, concessions are your best friend. They literally let you buy more house for less liquid hit. And investors — don’t sleep on this either. If you’re buying your next short-term rental, concessions give you breathing room to renovate, furnish, or market harder out the gate. And I get it… some might say lower price means lower property taxes long-term. That’s true. But the way most municipalities work, you’re still gonna get reassessed soon anyways. Short-term liquidity hits harder.
Wait — Can I Use Both?
Yup. That’s the sweet spot. Get a price cut and grab concessions. Sometimes a seller just wants out. Use that. Ask for $10K off and $6K toward closing. Worst they can say is no. Again, strategy over pride. Run the numbers. Check your goals. Use both levers if you can.
What Types of Costs Can Seller Concessions Cover?
This is where people mess up. They hear “seller will contribute up to $10,000” and think it’s free money.
It’s not. There are rules. Lenders cap how much sellers can contribute, depending on loan type and down payment.
Common stuff seller concessions can cover:
- Loan origination fees — that 0.5% to 1% the lender charges to start the process
- Discount points — use concessions to buy down your interest rate
- Title insurance & escrow fees
- Home inspection & appraisal
- Tax escrows, prepaid homeowners insurance
- Recording & doc prep fees
They can’t be used to pay your down payment directly — but almost everything else surrounding your closing? Fair game.
Bottom line: if you can swing seller concessions vs. price reductions, and still hit your monthly goals — you win on day one.
FAQs
Can you ask for both seller concessions and a price reduction?
Yes. Don’t be shy — use both during negotiations if the market allows.
Do seller concessions affect home appraisals?
Not directly. But appraisers may flag if concessions seem excessive. Stay within norm (3–6% range).
Is a seller more likely to accept a price cut or seller concession?
Depends on their motivation. Investors might prefer concessions to hold higher comps. End-users may not care.
Do seller concessions change my loan amount?
Nope. They reduce your upfront costs, but the loan stays based on purchase price.
Is there a limit on seller concessions?
Yep. Different for each loan type (FHA, VA, conventional). Usually capped at 3–6%.
Conclusion:
Seller concessions and price reductions both offer savings, but they serve different goals. If immediate cash flow is your priority, seller concessions deliver more value (v) by easing upfront costs and boosting flexibility. Price reductions help long-term with slightly lower payments, but don’t free up funds at closing. Ideally, use both—if the market allows—to create a deal that supports your financial strategy today and tomorrow. It’s not about pride—it’s about playing smart.