What are seller concessions and how do they work?

Key takeaways:  

• By covering expenses like closing costs, repairs or even temporary interest rate buydowns, concessions can ease the financial burden of buying a home without lowering the purchase price. 
• Repair credits, home warranties and interest rate buydowns can offer more immediate value to buyers than a simple price cut — especially for those focused on monthly affordability or moving quickly to closing. 
• Seller concession limits vary by loan type and down payment size, and they’re more common in buyer‑friendly markets, making it important for both buyers and sellers to understand their options before negotiating. 

Seller concessions are financial incentives homeowners offer to attract buyers, encourage stronger or faster offers or close a deal already under contract.

Buyers are in a better position to seek concessions in markets where the supply of houses exceeds demand. Through concessions, sellers agree to cover specific expenses at or before closing, giving buyers added financial support. Here are some typical concessions that sellers make: 

Homebuyers pay closing costs when purchasing a home. These include: 

• Title insurance 
• Mortgage loan origination fees  
• Prepaid property taxes  
• Prepaid homeowners insurance premiums  
• Appraisal fees  

Closing costs typically range from 2% to 5% of the home's price or the loan amount. For example, on a $400,000 home, closing costs could be $8,000 to $20,000. These amounts can vary based on location, lender and negotiation. Buyers can ask sellers to pay some of these costs. While concessions reduce a buyer’s out-of-pocket costs at closing, they usually don’t require the seller to bring extra cash. The amount is typically deducted from the seller’s proceeds at closing. 

A home warranty can give buyers peace of mind by covering certain repairs after they move in. This concession can be especially appealing for older homes or properties with aging systems or appliances. 

These plans typically cost a few hundred dollars a year — far less than replacing a major appliance, water heater or heating, ventilation and air conditioning system before closing. 

Repair or renovation credits can make older or outdated homes more appealing. If a home inspection reveals needed repairs or system replacements, sellers may offer credits to cover part of the cost. 

These credits can benefit both sides: 

• Buyers retain control: Instead of accepting quick fixes, buyers can choose materials, contractors and timing for repairs.  

• Closings stay on track: Large repairs can delay a transaction for weeks. Credits allow the deal to close on schedule.  

• Credits are negotiable: Sellers can contribute toward repairs without covering the full cost, acknowledging issues without footing the entire bill.  

Some sellers offer concessions that temporarily lower a buyer’s interest rate to help offset higher borrowing costs.  This lowers monthly payments and reduces interest paid early on, though it comes with an upfront cost. 

How a buydown works 

A seller offers $8,000 in credits toward an interest rate buydown known as a 1-1 buydown, where the lender agrees to lower the mortgage loan rate by 1%. This lowers the buyer’s rate to 6.25% for the first two years of the loan. That reduces the monthly payment by $329 during that period. 

• Monthly payment for first two years: $3,048  

• Total savings through year two: $7,896  

If the seller instead offered an $8,000 price reduction, the buyer’s monthly payment would drop by just $49 — a much smaller impact for buyers focused on cash flow. 
Comparison example: 

• No concession  
  Purchase price: $550,000  
  Loan amount (90%): $495,000  
  Interest rate: 7.25%  
  Monthly payment: $3,377  

• 1-1 buydown concession ($8,000)  
  Purchase price: $550,000  
  Loan amount (90%): $495,000  
  Interest rate: 6.25% for first two years; 7.25% after  
  Monthly payment: $3,048 for first two years  

• $8,000 price discount  
  Purchase price: $542,000  
  Loan amount (90%): $487,800  
  Interest rate: 7.25%  
  Monthly payment: $3,328  

Seller concessions are most common in neutral or buyer’s markets. Buyers looking to negotiate should: 

• Research the property: Understanding a home’s market value helps identify pricing flexibility.  

• Understand loan options: Knowing expected closing costs and interest expenses makes it easier to evaluate concessions.  

• Make a strong offer: Competitive offers paired with reasonable concession requests are more likely to succeed.  

• Set priorities: Decide which concessions matter most — such as a rate buydown for affordability or renovation credits for older homes.  

• Be prepared to walk away: Some concessions may be deal-breakers. Knowing your limits is essential.  

For sellers, concessions can make a listing more competitive than other homes for sale.  They can help bridge pricing gaps, meet buyers halfway and move a sale forward faster. 

Concessions are less common in strong seller’s markets, where demand exceeds available inventory. 

Most mortgage programs cap how much sellers can contribute, based on a percentage of the purchase price: 

• VA loans: Up to 4%  

• FHA loans: Up to 6% of the purchase price or appraised value, whichever is lower  

• USDA loans: Up to 6%  

• Conventional loans: Typically 2% to 6%  

For conventional loans, limits depend on the buyer’s down payment and property type: 

• Up to 10% down: 3% limit  

• 10% to 25% down: 6% limit  

• 25% or more down: 9% limit  

• Investment properties: 2% limit  

This story was updated April 30.