When buying a home, most buyers naturally focus on one number: the purchase price.

But price is only one part of a real estate negotiation.

Depending on the buyer’s financing, available cash and the terms of the transaction, a seller concession may sometimes provide more immediate value than negotiating the same amount off the purchase price.

The key is to evaluate the entire structure of the offer, not just the headline price.

What Is a Seller Concession?

A seller concession is an amount the seller agrees to contribute toward certain eligible buyer expenses at closing.

Depending on the loan program and lender requirements, seller concessions may be used toward expenses such as:

  • Closing costs
  • Prepaid expenses
  • Discount points that may reduce the buyer’s mortgage interest rate

How much a seller may contribute—and exactly how those funds may be used—depends on factors including the loan program, property type, down payment and lender guidelines.

That is why the buyer’s mortgage professional should be involved before the offer is written.

Seller Concession vs. Price Reduction

Consider a buyer deciding between asking for a $10,000 price reduction or requesting a $10,000 seller concession.

Those two options do not necessarily produce the same financial result.

A lower purchase price reduces the amount paid for the property and may slightly reduce the monthly mortgage payment.

A seller concession, when permitted by the buyer’s financing, may instead be available to reduce eligible cash-to-close expenses or purchase discount points.

For some buyers, that can create a more noticeable near-term financial benefit than applying the same dollar amount solely toward a lower purchase price.

That does not mean a seller concession is always the better option.

The right structure depends on the buyer’s:

  • Loan program
  • Interest rate
  • Down payment
  • Available cash
  • Closing costs
  • Planned length of ownership
  • Overall financial goals

The lender should calculate the actual impact before the buyer decides which approach makes the most sense.

Why Offer Structure Matters

Instead of asking only:

“How much can we get the seller to reduce the price?”

A better question may be:

“How can we structure the offer to best support the buyer’s goals and financing?”

Depending on the circumstances, the answer could be:

  • A lower purchase price
  • A seller concession
  • A combination of price and concessions
  • Different contract terms that strengthen the buyer’s overall offer

There is no single strategy that is best for every transaction.

Why Your Realtor and Lender Should Work Together

Seller concessions are a good example of why coordination between a buyer’s Realtor and mortgage professional matters before an offer is submitted.

The Realtor can evaluate factors such as the property, comparable sales, current competition, seller motivation and negotiating position.

The lender can evaluate how different offer structures may affect the buyer’s financing, cash required at closing and potential use of discount points.

That allows the buyer to compare the options using actual numbers instead of assuming that the biggest price reduction automatically creates the best result.

Why Would a Seller Consider a Concession?

A seller concession is still part of the negotiation, and a seller will typically evaluate it along with the purchase price and the rest of the contract.

A seller may consider an offer that includes a concession when the overall terms and anticipated net proceeds remain acceptable.

For that reason, buyers should not view seller concessions as “free money.” They are one negotiating tool among many and should be considered as part of the complete offer.

Buying a Home Along the Grand Strand?

Properties throughout Myrtle Beach, Surfside Beach, Garden City Beach and Murrells Inlet can differ significantly in price, property type, financing considerations and seller motivation.

That is especially true when comparing primary residences, second homes, condominiums, vacation properties and investment real estate.

If you are considering making an offer, it can be worthwhile to compare a price reduction, seller concession or combination of the two before the contract is written.

Dan and Joseph can help you evaluate the real estate and financing sides together so you can see how the available options may affect your particular transaction.

Dan Sine, REALTOR®
Dunes Realty Sales
843-455-6319
dansinerealtor.com

Joseph Jones, Branch Manager
CrossCountry Mortgage
843-450-2343
ccm.com/joseph-jones

 

Seller concessions and permitted uses vary by loan program, property type, down payment, lender guidelines and other financing requirements. Financing scenarios should be reviewed with a qualified mortgage professional based on the buyer’s individual circumstances.