Seller Concessions: What They Are, How They Work, and How They Benefit Sellers & Buyers
Published: May 14, 2024
Seller Concessions: What They Are, How They Work, and How They Benefit Sellers & Buyers
Buying a home is an exciting journey but can also come with unexpected costs and hurdles. If you’re buying or selling a home, using seller concessions can often make buying a home more accessible for homebuyers or can sweeten the deal and speed up the selling process after you’ve listed your home.
In this guide, we’ll break down what seller concessions are, how they work, and why they’re beneficial for both buyers and sellers.
What Are Seller Concessions?
Seller concessions are agreements between the buyer and seller during the homebuying process. These agreements typically involve an agreement for the seller to pay some of the buyer's closing costs, such as appraisal fees, title insurance, or even points on their mortgage. Essentially, it's the seller chipping in to help cover the expenses associated with closing on the home.
By offering concessions, sellers can attract more potential buyers and make their property more appealing in a competitive market. For buyers, seller concessions can alleviate some of the financial burden associated with closing on a home to make their home purchase more affordable.
If negotiated properly, seller concessions can hugely benefit all parties to help make the homebuying process faster, smoother, and more affordable.
How Seller Concessions Work
When a seller agrees to provide concessions, it's typically negotiated as part of the purchase agreement. The specifics of the concessions, including the amount and what expenses they cover, are outlined in the contract. Both parties need to agree on the terms upfront to avoid any misunderstandings later in the process.
Once the agreement is in place, the concessions are typically applied as a credit towards the buyer's closing costs. Instead of the buyer having to pay these costs out of pocket, they can be rolled into the mortgage and paid incrementally over the loan’s term. It's important to note that there are limits to how much a seller can contribute towards closing costs, which can vary depending on the type of mortgage and the lender's guidelines.
How Seller Concessions Benefit Both Buyers and Sellers
Seller concessions offer numerous benefits for both buyers and sellers. For buyers, they provide much-needed financial relief during the homebuying process. By having some of their closing costs covered by the seller, buyers can preserve their savings for other expenses, such as moving costs or home improvements.
On the seller's side, offering concessions can help expedite the sale of their property. In a competitive market where multiple offers are common, providing concessions can make a listing stand out and attract more potential buyers. Additionally, by helping buyers with their closing costs, sellers may be able to negotiate a higher sale price for their home.
Seller concessions are a valuable tool in the homebuying process that benefit both buyers and sellers alike. By understanding what seller concessions are, how they work, and their mutual benefits, homebuyers can make informed decisions that help them achieve their homeownership goals while navigating the complexities that commonly come when closing on a new home.
If you have any questions about seller concessions throughout your homebuying process, feel free to reach out to your UMortgage Loan Originator. They’ll be able to help you make an informed decision before negotiating your purchase agreement to make sure your mortgage works with your individual financial situation.