How to Ask for Seller Concessions

Seller concessions represent a financial arrangement where the home seller agrees to contribute funds toward specific expenses. These contributions are negotiated as part of the purchase agreement and can reduce the buyer’s upfront costs associated with acquiring a home. They make a property more appealing by alleviating immediate financial burdens beyond the purchase price.

Types of Seller Concessions

Seller concessions can take various forms, addressing different financial needs.

• Credits towards closing costs: These are fees and expenses at closing. They can include loan origination fees, appraisal fees, title insurance premiums, recording fees, and attorney fees, often totaling 2% to 6% of the home’s purchase price or loan amount. The seller’s contribution directly offsets these charges, reducing the buyer’s cash needed at closing.
• Repair credits or allowances: The seller provides funds to cover necessary repairs identified during inspection. Instead of physical repairs, a credit is given at closing, allowing the buyer to manage them post-purchase. This expedites closing while addressing property concerns.
• Home warranty: Sellers may offer to purchase a home warranty, covering major appliances and home systems for a year. This provides peace of mind against unexpected repair costs for items like plumbing, electrical, or heating systems. This warranty is a service agreement, distinct from homeowner’s insurance.
• Mortgage rate buydown: The seller contributes funds to temporarily or permanently lower the buyer’s interest rate. For instance, a temporary buydown might reduce the interest rate by a percentage point or two for the first one or two years of the loan. This can make the home more affordable during the initial period of ownership, especially with higher interest rates.

Identifying What to Ask For

Determining seller concessions requires evaluating the property, your financial situation, and market conditions.

Home Inspection Report

A primary source is the home inspection report, detailing property condition and necessary repairs. Findings related to major systems like HVAC, plumbing, electrical, or structural issues can justify requests for repair credits or a price reduction. This report provides objective evidence to support your requests.

Financial Needs

Understanding your financial needs is equally important, as seller contributions can alleviate upfront costs. Buyers should review estimated closing costs, typically 2% to 6% of the loan amount, to identify areas where seller assistance would be most beneficial. This includes fees like loan origination, appraisal, title insurance, and prepaid expenses such as property taxes or homeowners insurance premiums. Knowing your cash reserves helps prioritize where concessions would have the greatest impact.

Market Conditions

Market conditions significantly influence the likelihood and size of potential concessions. In a buyer’s market with more homes than buyers, sellers are often more motivated to offer concessions to attract offers. Conversely, in a seller’s market with high demand, sellers may be less inclined due to competitive offers. Researching comparable sales and current inventory levels provides insight into the market’s leverage. Assessing the property’s overall condition, beyond inspection findings, also informs your requests. Consider the age of major components like the roof, water heater, and appliances, as these items have finite lifespans and may incur significant replacement costs. For example, an older HVAC system nearing the end of its lifespan could warrant a concession for future replacement. Prioritizing concessions based on financial impact and immediate property needs ensures requests are reasonable and impactful.

Making the Request

Once specific concessions are identified, formally present these requests and navigate negotiation.

Timing and Justification

Timing is important; concessions are typically requested either with the initial offer or after the home inspection contingency. Requesting after inspection, when specific issues are identified, provides clear justification.

Communication and Documentation

Communication is handled through your real estate agent, who drafts an addendum or incorporates concessions into the initial offer. This documentation ensures agreed-upon contributions are legally binding. The request should clearly articulate specific dollar amounts for credits or itemized lists for repairs. For instance, you might request a “$2,000 credit at closing for HVAC repairs.”

Negotiation Process

Negotiation involves a back-and-forth between buyer and seller. Sellers are not obligated to agree to concessions, and their willingness depends on their motivation, the property’s condition, and market demand. For example, if a home has been on the market for an extended period, the seller might be more receptive. In a competitive market, a seller might reject requests or offer a reduced amount.

Limits on Concessions

There are limits on seller concessions, often tied to the mortgage loan type. Conventional loans typically allow contributions of 3% to 9% of the purchase price, depending on the buyer’s down payment. FHA loans cap concessions at 6% of the purchase price, while VA loans allow up to 4% for certain expenses. The total amount of concessions cannot exceed the buyer’s actual closing costs. Once an agreement is reached, concessions are explicitly written into the final purchase contract, ensuring all parties are clear on obligations.