Seller Concessions: How to Get the Seller to Cover Your Closing Costs

Closing costs are one of the biggest surprises in the home buying process. You've saved for a down payment, gotten pre-approved, and found the right home. Then a lender hands you a Loan Estimate showing $12,000 in closing costs you weren't fully expecting.

Seller concessions are how buyers reduce or eliminate that burden without draining their reserves. Used correctly, they're one of the most effective negotiating tools available to you, especially in a market where sellers have more motivation to close deals than they did a few years ago.

Here's how seller concessions work, how much you can ask for by loan type, and how to structure your offer so the request actually gets accepted.

A seller concession is an agreement by the seller to cover a portion of the buyer's closing costs as part of the purchase transaction. Instead of the buyer bringing the full closing cost amount to the table, the seller contributes a specified dollar amount toward those costs from their sale proceeds.

The concession doesn't reduce the purchase price. The home still sells at the agreed price. The seller simply applies a portion of what they receive toward the buyer's costs at closing. From a financing perspective, the purchase price remains the same, the loan amount stays the same, and the closing costs are paid from the seller's side of the settlement statement rather than the buyer's.

This distinction matters because it means seller concessions don't affect your loan-to-value ratio the way a price reduction would. You're not borrowing more or less. You're simply redirecting where the closing cost payment comes from.

Seller concessions can be applied to a wide range of buyer closing costs, including lender fees, origination charges, discount points, title insurance, escrow fees, prepaid interest, property tax reserves, homeowner's insurance prepayment, and in some cases mortgage insurance premiums.

They can also fund rate buydowns. A seller-paid 2-1 buydown, where the seller funds the escrow account that reduces the buyer's rate in years one and two, is one of the most common and effective uses of a seller concession in the current market.

What seller concessions cannot do is cover the buyer's down payment. The down payment must come from the buyer's own verified funds, gift funds with proper documentation, or down payment assistance programs. Concessions are strictly for closing costs and prepaid items.

Every loan program sets a maximum limit on the seller concession amount, expressed as a percentage of the purchase price or appraised value, whichever is lower. Asking for more than the limit isn't allowed, and any excess concession must be reduced before the loan can close.

-- Conventional loans with less than 10% down allow a maximum seller concession of 3% of the purchase price. On a $500,000 purchase, that's $15,000 maximum.

-- Conventional loans with 10% to 24% down allow up to 6% in seller concessions.

-- Conventional loans with 25% or more down allow up to 9% in seller concessions.

-- FHA loans allow seller concessions up to 6% of the purchase price regardless of down payment amount. On a $400,000 FHA purchase, that's up to $24,000 the seller can contribute toward your costs.

-- VA loans allow seller concessions up to 4% of the purchase price for non-allowable fees and certain specific costs, plus additional amounts for other typical closing costs. VA's concession rules are structured differently than other loan types and worth discussing specifically with your lender.

-- USDA loans allow seller concessions with no specific percentage cap stated in guidelines, though the concession cannot exceed the actual closing cost amount.

One important rule across all loan types: the seller concession cannot exceed the buyer's actual closing costs. If your closing costs total $9,000 and the seller agrees to a $12,000 concession, the excess $3,000 disappears. It doesn't get applied to the down payment, credited back to you, or carried anywhere. It simply goes unused. Structure your concession request to match your actual costs.

LINK: How to use your Loan Estimate to calculate exactly how much in seller concessions to request

The market context determines how much leverage you have to request concessions and whether a seller will accept them.

In a buyer's market, where homes are sitting longer and sellers are motivated, concession requests are frequently accepted. Sellers who have already reduced their price are often willing to offer concession credits rather than additional price cuts because the optics differ even if the math is similar.

In a competitive market with multiple offers, asking for concessions can weaken your offer relative to buyers who aren't requesting them. A seller evaluating three offers will generally prefer the one with fewer conditions and concessions, all else being equal.

The calculation isn't always straightforward. In some cases, a full-price offer with a concession request is still more attractive to a seller than a lower offer without one, because the seller nets more even after covering the concession. Your real estate agent and lender can model both scenarios and tell you which structure makes your offer most competitive on a specific property.

Buyers often face a choice between asking for a price reduction and asking for a seller concession. They're not equivalent, and choosing the wrong one costs you.

A price reduction permanently lowers the purchase price, which lowers your loan amount and every payment for the life of the loan. It also lowers your property tax base in the first reassessment cycle. The savings compound over time.

A seller concession reduces your out-of-pocket cost at closing but doesn't change the loan amount or the monthly payment. The benefit is immediate and one-time.

Which one is better depends on your specific situation. If you're cash-constrained at closing and have sufficient monthly income to handle the full payment comfortably, a concession preserves your liquidity at the moment you need it most. If you're stretching on the monthly payment, a price reduction that lowers the payment permanently may serve you better over the long term than a one-time closing cost offset.

Most buyers benefit more from a concession than a price reduction when the cash-to-close burden is the binding constraint. A $10,000 price reduction on a $500,000 purchase lowers your monthly payment by roughly $55 to $60. That same $10,000 as a concession eliminates $10,000 in cash you'd otherwise need at the table.

The cleanest way to request seller concessions is to specify the dollar amount in your offer rather than a percentage. This gives the seller a clear, concrete number to evaluate rather than a formula that requires calculation.

Your offer might read: "Buyer requests seller to contribute $10,000 toward buyer's closing costs and prepaid expenses." Simple, specific, and easy for both parties to understand.

Work with your lender before submitting an offer to confirm the actual closing cost estimate for that specific property and loan structure. That number tells you what to ask for, ensures you're not requesting more than the program limit, and prevents the unused concession problem described earlier.

Getting pre-approved with a lender who runs accurate closing cost estimates before you make offers, rather than relying on rough ranges, is the foundation of this entire strategy.

LINK: The full breakdown of what your closing costs include so you know exactly what a seller concession can cover

Seller concessions aren't charity and they're not a sign of a desperate seller. They're a legitimate financing mechanism built into every major loan program. Buyers use them every day in Washington State to preserve cash, fund rate buydowns, and get to the closing table without depleting their reserves.

The buyers who use them most effectively are the ones who understand the limits, know exactly what their closing costs are before they negotiate, and work with a lender and agent who can model the real numbers behind each offer structure.

Want to know how much in concessions you could request on your specific purchase and how to structure your offer for the best outcome? Schedule a free 15-minute call and we'll run the numbers with you.