All About Seller Concessions in Real Estate
Seller concessions haven’t been seen a lot in real estate contracts in the last few years but we’re seeing them emerge again in the Dallas Fort Worth real estate market. Concessions are something that can help both home buyers and sellers and shouldn’t be overlooked as a bargaining tool.
In any real estate transaction, both the buyer and the seller are looking to maximize their bottom line and this means clients and agents are always strategizing ways to improve the terms of the deal.
We’re seeing a lot more seller concessions in the 2023 real estate market as the market fluctuates day to day and is affected by higher interest rates . Seller concessions sweeten the deal for a buyer and, in a shifting market, can help a seller get a house under contract.
What is a Seller Concession?
A seller concession means the seller is agreeing to cover the cost of things the buyer usually pays for.
We’ve commonly seen them over the past couple of years related to repairs. A seller might offer a credit rather than actually completing repairs on a property.
Recently, we’re seeing seller concessions a lot more as an incentive to get a house under contract. The concessions might be related to closing costs, appraisal or other fees, or could even be for something like a 2-1 buydown. In a 2-1 buydown, the seller extends a one-time credit at closing that reduces a buyer’s interest rate by 2% the first year and 1% the second year before the rate goes back to the fixed rate for the remainder of the loan or until the property is refinanced.
How Do You Get Seller Concessions?
Seller concessions are sometimes discussed directly on a listing. I recently saw a listing where the sellers needed to fill in a backyard pool and rather than doing the work themselves, they got a quote on the cost, and then offered that amount back as a concession at closing. If a seller has a lot of equity in their house, this is a nice way to offer something back to a buyer without having to put money down before closing.
Seller concessions can also be a part of the negotiations and they can come up at any time during the process, either in the initial offer or as an addendum in the transaction. Right now, we’re seeing a lot of buyers asking for seller concessions up front, especially if they want to use funds toward a 2-1 buydown or something similar.
Can Anyone Get Seller Concessions?
Seller concessions are allowed on all major loan types {conventional, FHA, VA} but there are certain percentages allowed based on the type of loan and the amount of the down payment. Sometimes a seller concession exceeds the closing costs and it’s important to know that you can’t get that cash back at closing. What you don’t use, you’ll lose. Because of that, a seller concession, while it sounds like a great discount, may not be the best route. It may be better to get the money off the top and reduce the sales price rather than ask for money back in a concession. Your best bet is to have a conversation with your lender up front and find out what will benefit you the most and then write the offer up with those specifics.
If you have more questions about seller concessions or about the buying or selling process in general, please reach out! You can find my contact information on the contact page of this site.
