Seller concessions: what they are and how they work

It's Tuesday night, and your buyers just opened their Loan Estimate. They're $6,000 short on closing costs, and they're ready to walk. Before they do, ask one question: has anyone asked the seller for a concession?

A seller concession is money the seller agrees to put toward the buyer's closing costs, prepaid items, or a lower interest rate, instead of cutting the price. Concessions are common right now. Redfin found that sellers gave them 44.7% of U.S. home sales in the three months ending August 2026, based on reports from its own buyer's agents. That was the highest August share since at least 2020. Every loan program caps how much a seller can give, from 2% to 9% of the price, depending on the loan.

You'll use this in real deals, not just on the exam. Nervous buyers want to know their options, and you need to explain them clearly.

Quick FAQ

What is a seller concession in real estate?

A seller concession is a dollar amount the seller agrees to pay toward the buyer's costs as part of the purchase offer. It can cover closing costs, which are the fees due at closing, like lender, title, and escrow charges. It can also cover prepaid items, which are bills paid ahead of time, like property taxes and homeowners insurance. Or it can pay for discount points, which are fees paid up front to get a lower interest rate.

The concession shows up on the buyer's Closing Disclosure as a seller credit. The Closing Disclosure is the final form that lists every cost of the loan. The sale price doesn't change.

Why would a seller agree? To draw more offers in a slow market, to help a buyer cover an appraisal gap, or to close without dropping the price on paper. An appraisal gap is when the home appraises for less than the contract price. Either way, the seller nets less. The money just comes off the closing statement instead of the price.

How do seller concessions work in a real transaction?

The buyer's agent asks for the concession in the offer. If the seller agrees, it gets written into the purchase contract and applied at closing as a credit.

Example: Marcus and Jen are buying a $350,000 home. They have their down payment, but they're $5,000 short for closing costs. Their agent writes the offer at $350,000 with a $5,000 seller concession. The seller says yes. At closing, $5,000 comes out of the seller's proceeds and goes toward the buyers' costs. Their loan amount and monthly payment stay the same.

A concession can also pay for a rate buydown. With a permanent buydown, the seller pays for discount points that lower the rate for as long as the buyer keeps the loan. With a temporary 2-1 buydown, the buyer pays as if the rate were two percentage points lower in year one and one point lower in year two. In year three the full rate kicks in, and the payment goes up. Which one fits depends on how long the buyer plans to keep the loan.

What are the seller concession limits by loan type?

Every loan program caps concessions as a percentage of the price or value, and the buyer's lender checks the limit before closing. For conventional loans, the cap depends on loan-to-value, or LTV. LTV is the loan amount divided by the home's value. A buyer who puts 5% down has a 95% LTV.

Fannie Mae's Selling Guide sets the conventional tiers and figures them on the lower of the sales price or the appraised value. The pattern is simple: more equity means more room. A buyer putting 25% down can get up to 9% from the seller. A buyer putting 5% down tops out at 3%.

VA works differently, and new agents trip on it often. The seller can pay the buyer's normal closing costs with no cap at all. The 4% limit only covers extras, like paying the VA funding fee, prepaying taxes and insurance, or paying off the buyer's debts. VA measures that 4% against the home's reasonable value, which comes from the VA appraisal. (LINK: VA Lenders Handbook, Chapter 8)

Example: A VA buyer's home has a reasonable value of $400,000. The seller can pay all the normal closing costs and still offer up to $16,000, which is 4%, toward extras like the funding fee.

Is a seller concession the same as a price reduction?

No. People use the terms loosely, but they solve different problems. A price reduction lowers the price, so the loan and the monthly payment shrink. A concession leaves the price alone and cuts the cash the buyer needs on closing day.

Fortune frames the choice around time and cash. A buyer who plans to stay for years may get more out of a lower price. A buyer who is short on cash now, but fine with the payment, may get more out of a concession.

Example: On a $400,000 home, a $10,000 price cut trims the loan and lowers the monthly payment a little. A $10,000 concession leaves the payment where it was but keeps $10,000 in the buyer's bank account at closing.

Is asking for a seller concession a good move for your buyer?

It depends on the buyer's cash, the market, and the loan. Walk every buyer through the USRT 3-Question Concession Check before you write the request into an offer:

1. Will the buyer have enough cash left after closing? If a concession frees up money they need for moving or repairs, it's worth asking for.
2. Can the offer handle it? In a hot seller's market, a concession can make your offer lose to a cleaner one. In a buyer's market, many sellers expect the ask.
3. Does the loan allow it? Check the table above first. A buyer putting 5% down on a conventional loan has a 3% ceiling, not 9%.

Do seller concessions hurt the seller?

They cost the seller money, yes. A concession comes straight out of the seller's net proceeds, like any other cost of selling. A $10,000 concession on a $400,000 home means the seller walks away with $10,000 less. Plenty of sellers still take that deal, because it can mean a faster sale, more buyers, or keeping the sale price they wanted on record. If you're the listing agent, walk the seller through that math before a request comes in, not after.

Try a sample question

A buyer is using a conventional loan with 8% down on a home she'll live in. The price is $300,000, and the home appraises at $300,000. What's the most the seller can contribute?

A. $6,000

B. $9,000

C. $18,000

D. $27,000

Answer: B. With 8% down, the LTV is 92%, which is above 90%. That caps concessions at 3%, and 3% of $300,000 is $9,000.

The rule to remember

Concessions are a standard negotiating tool, not a trick. A price cut lowers the payment. A concession lowers the cash to close. Know which one your buyer needs, and check the cap before you ask.

Ready to make sense of terms like this on exam day?

Seller concessions are exactly the kind of real-world concept that shows up reworded on the state exam. Confuse a concession with a price cut, and you can miss a question you actually knew. If terms like this still feel shaky, US Realty Training's Exam Prep & Crash Course covers the practical vocabulary and math you'll be tested on, not just definitions to memorize.