# Seller concessions

> Seller concessions are costs a seller agrees to pay for the buyer, most often a credit toward the buyer’s closing costs, prepaid items or repairs. They lower what the seller nets without changing the contract price.

Also called: seller credit, seller assist, closing cost credit, seller-paid closing costs, interested party contributions. Topic: Selling a home.

Seller concessions are written into the [purchase agreement](https://brokerandagent.com/glossary#purchase-agreement), usually as a dollar amount or a percentage of the price, and appear as a credit on the [Closing Disclosure](https://brokerandagent.com/glossary#closing-disclosure) at closing. They help buyers who have the [down payment](https://brokerandagent.com/glossary#down-payment) but are short on cash for [closing costs](https://brokerandagent.com/glossary/closing-costs).

## What can seller concessions pay for?

Most concessions go toward the buyer’s closing costs: lender fees, [discount points](https://brokerandagent.com/glossary#discount-points) to buy down the rate, title charges, prepaid interest, and the taxes and insurance that fund the buyer’s escrow account. A concession can also stand in for repairs, giving the buyer a credit instead of fixing an item the inspection found.

Loan rules limit how concessions are used. Under Fannie Mae’s guidelines, for example, contributions from the seller or other interested parties can pay closing costs and prepaids but can’t count toward the down payment or the reserves a buyer must show.

## How much can a seller contribute?

Each loan program caps concessions as a share of the price or appraised value, whichever is lower. For a conventional loan through Fannie Mae on a main home or second home, the cap depends on the [loan-to-value ratio](https://brokerandagent.com/glossary#loan-to-value-ratio): 3% when the buyer puts down less than 10%, 6% with 10% up to 25% down, and 9% with 25% or more down. Investment properties are capped at 2%. FHA, VA and USDA loans set their own limits, so the buyer’s lender has the final word.

Anything over the program’s cap is treated as a price reduction for the loan. And because a buyer generally can’t take leftover credit as cash, a credit larger than the costs it can pay for is usually trimmed before closing.

## Is a concession better than a price cut?

For the seller, the two cost about the same: an $8,000 credit and an $8,000 price reduction both lower your [net proceeds](https://brokerandagent.com/glossary#net-proceeds) by roughly $8,000. A price cut also trims anything figured on the price, like a percentage commission or the transfer tax, a little.

For the buyer, the difference is cash. A price cut lowers the loan and the down payment slightly; a credit puts the full amount toward costs due at closing. The CFPB notes the trade-off: a seller who agrees to a credit will often ask for a higher price to cover it, so the buyer pays for it over the life of the loan.

## How do concessions differ from paying the buyer’s agent?

Since August 2024, sellers decide separately whether to offer compensation to a buyer’s agent. NAR describes a concession as something different: the seller covering certain costs of the buyer’s purchase. Whether a buyer can put a concession toward their own agent’s fee depends on the loan program, so check with the lender before writing it into an offer.

## Example: an $8,000 seller credit on a $400,000 home

| | |
| --- | --- |
| Contract price | $400,000 |
| Seller credit toward the buyer’s closing costs | $8,000 (2% of the price) |
| Buyer’s closing costs and prepaids (assumed) | $12,000 |
| Buyer’s costs due at closing after the credit | $4,000 |
| Fannie Mae cap for a main home with 10% down | 6%, or $24,000 |
| Change in the seller’s net proceeds | −$8,000 |

With 10% down, an $8,000 price cut instead would lower the buyer’s down payment by only $800 and leave all $12,000 of closing costs due. The numbers are illustrative; the buyer’s lender confirms what a credit can pay for.

## Common mistakes

- Agreeing to a credit larger than the buyer’s closing costs and prepaids; the extra usually can’t be used.
- Assuming every loan allows the same amount. Conventional, FHA, VA and USDA loans each set their own caps.
- Forgetting that a credit lowers the seller’s proceeds just as a price cut does.
- Agreeing to a credit verbally. The lender and settlement agent work from the written contract.

## Questions

### Do seller concessions affect the appraisal?

The appraisal still has to support the contract price. If a credit was built into a higher price and the home appraises lower, the buyer and seller may need to renegotiate, as with any [appraisal gap](https://brokerandagent.com/glossary/appraisal-gap).

### Can a buyer ask for concessions in a seller’s market?

They can ask, but in a [seller’s market](https://brokerandagent.com/glossary#sellers-market) sellers are more likely to say no or to favor a higher offer with a credit built in. In a [buyer’s market](https://brokerandagent.com/glossary#buyers-market), concessions are a common way to close a deal without cutting the list price.

### Is a seller credit the same as a seller concession?

People use the terms interchangeably. A seller credit is the most common kind of concession: a dollar amount the seller gives the buyer at closing toward their costs.

Calculator: [Seller net sheet calculator](https://brokerandagent.com/tools/seller-net-sheet-calculator)

Data: [Closing costs by state](https://brokerandagent.com/research/closing-costs-by-state)

## Related terms

- [Closing costs](https://brokerandagent.com/glossary/closing-costs): Closing costs are the fees and taxes buyers and sellers pay to complete a home sale beyond the price itself, such as lender charges, title insurance, settlement and recording fees and transfer taxes. Who pays which depends on the contract and local custom.
- [Seller net sheet](https://brokerandagent.com/glossary/seller-net-sheet): A seller net sheet is an estimate of what a home seller walks away with after the sale: the price minus commissions, the mortgage payoff, closing costs, taxes and any credits to the buyer.
- [Net proceeds](https://brokerandagent.com/glossary#net-proceeds): Net proceeds are the money a seller receives from a sale after the mortgage payoff, commissions, closing costs, taxes and any credits to the buyer come out of the sale price.
- [Loan-to-value ratio](https://brokerandagent.com/glossary#loan-to-value-ratio): Loan-to-value ratio is the mortgage amount divided by the home’s value, usually the lower of the price or the appraised value. A $360,000 loan on a $400,000 home is 90% LTV; a lower LTV generally means better terms.
- [Buyer’s market](https://brokerandagent.com/glossary#buyers-market): A market with more homes for sale than buyers ready to purchase them, so homes tend to sit longer, prices soften and buyers have more room to negotiate on price, repairs and closing costs.
- [Purchase agreement](https://brokerandagent.com/glossary#purchase-agreement): The signed contract between a buyer and a seller that sets the price, earnest money, contingencies, closing date and other terms of a home sale. Once both sides sign and deliver it, it’s binding, subject to its contingencies.

## Sources

- [Fannie Mae Selling Guide B3-4.1-02: Interested party contributions](https://selling-guide.fanniemae.com/sel/b3-4.1-02/interested-party-contributions-ipcs)
- [CFPB: What fees or charges are paid when closing on a mortgage?](https://www.consumerfinance.gov/ask-cfpb/what-fees-or-charges-are-paid-when-closing-on-a-mortgage-and-who-pays-them-en-1845/)
- [CFPB: Closing Disclosure explainer](https://www.consumerfinance.gov/owning-a-home/closing-disclosure/)
- [NAR: Consumer guide to offers of compensation](https://www.nar.realtor/the-facts/consumer-guide-offers-of-compensation)

Checked 2026-10-02 by the Broker & Agent team. General information, not legal, tax or lending advice.

Source: https://brokerandagent.com/glossary/seller-concessions