Seller concessions are costs the seller agrees to pay on your behalf at closing—closing costs, a mortgage rate buydown, repairs, a home warranty, and more. They reduce the cash buyers need to close, and depending on how you use them, the monthly payment too.
They’re also more available than they’ve been in years. 44.7% of home sellers gave concessions when selling their house in August 2026, according to Redfin. This number reaches nearly 70% in markets like Charlotte, Nashville, and Atlanta.
As more and more markets favor buyers, sellers are responding with enticements such as closing-cost credits, mortgage-rate buydowns, and more realistic listing prices.
Just what are seller concessions, and how can you use them to lower your costs and perhaps even your mortgage rate?
What are seller concessions?
Seller concessions are credits or costs a seller agrees to pay on a buyer’s behalf, such as paying all or a percentage of closing costs, covering the cost of discount points to “buy down” a mortgage rate, or including a home warranty.
For home buyers (especially first-time home buyers), seller concessions can reduce the cash required to close. For sellers, concessions can translate to higher offers or a faster path to finalizing a sale.
Typically, you’ll find seller concessions more common in buyer’s markets versus seller’s markets. In a buyer’s market, housing inventory exceeds the number of buyers, so a seller may need to sweeten the deal to make their home stand out. In seller’s markets, buyers outnumber available homes, so sellers tend to have the upper hand.
What seller concessions can cover
Concessions can cover various expenses and mortgage lender fees:
- A temporary mortgage rate buydown. For example, a 2-1 buydown would lower your mortgage rate by 2% the first year and 1% the second. The loan rate would revert to the permanent fixed rate in year three and for the remaining life of the mortgage.
- Appraisal fees. An appraisal assesses a home’s fair market value and is generally required by lenders.
- Attorney’s fees. Some real estate markets require an attorney to draft documents during the closing process.
- Discount points. Mortgage discount points are up-front fees that permanently lower the interest rate on your loan.
- Home repairs. If your inspection finds items that need repair, you may be able to negotiate with the seller to receive a cash credit at closing for the cost of repairs.
- Home warranty. To offer buyers peace of mind, a seller may agree to pay for a home warranty as part of the deal.
- Homeowners association dues. A seller may offer to pay the first year of a buyer’s HOA dues.
- Inspection fees. Most buyers will want a professional to assess a home’s general condition before proceeding with the purchase.
- Origination fees. If your lender charges a loan origination fee for your mortgage, you could ask the seller to cover those costs.
- Property taxes. Property taxes may need to be paid through the year-end at closing.
- Recording fees. These fees may be required to record the sale with your local government.
- Homeowners insurance. A seller may offer to pay a buyer’s insurance premium for a specified period. This could be in addition to other prepaid expenses.
- Title insurance. Title insurance protects your lender from financial loss if someone makes a legal claim against your property.
Can seller concessions cover the down payment?
Generally, seller concessions cannot be used to cover your down payment. Conventional loans, as well as government-backed VA and FHA mortgages, do not allow seller concessions to be applied to a buyer’s down payment.
In fact, concessions cannot exceed the buyer’s actual closing costs. Any seller contribution that exceeds eligible costs is typically forfeited.
Seller credit vs. seller concession
Seller credits and seller concessions are related terms, but they don’t mean the same thing.
A seller concession is any contribution from the seller that goes to the buyer at closing to offset the costs of the purchase. They can be monetary (such as cash toward closing costs) or non-monetary (such as prepaid HOA fees or a seller-paid home warranty).
A seller credit is a type of seller concession, but it’s exclusively a cash contribution toward the buyer’s closing costs. A credit could be a percentage of the home’s sale price (e.g., 3%) or seller-paid costs, such as appraisal and inspection fees.
Seller concession limits by loan type
| Mortgage type | Down payment | Maximum seller concession (% of purchase price) |
|---|---|---|
| Conventional mortgage(primary/second home) | Less than 10% | 3% |
| 10% to 25% | 6% | |
| More than 25% | 9% | |
| Conventional mortgage(investment property) | Any down payment amounts | 2% |
| FHA loan | Any down payment amounts | 6% of the home’s purchase price or appraised value, whichever is lower. |
| USDA loan | Any down payment amounts | 6% |
| VA loan | Any down payment amounts | 4% + typical VA closing costs |
The four ways buyers can use seller concessions
You need an edge to soften the blow of higher mortgage rates, and now that you know what seller concessions are — and how widely available they are — here are four ways to use them to your advantage.
Option 1: Cover closing costs
This is the most common seller concession: giving you a break on the mountain of closing costs you’ll face when signing your loan. While it’s appealing to have the seller hand over the cash to cover loan origination fees, title insurance, and appraisal fees — it may not be the most valuable option. Consider all offers and then do the math to determine where your biggest financial break lies.
Option 2: Buy down your mortgage rate permanently (discount points)
Having the seller buy discount points to lower your long-term home loan rate can be a game-changer for borrowers facing a mortgage rate that tests their monthly budget. A rate buy-down can really move the needle on affordability. For example, say the seller offers to reduce the price of the house by $10,000, or purchase an equal amount of discount points:
- A $10,000 price reduction on a $400,000 house, financed with a 6.5% 30-year fixed-rate mortgage, would save you about $63 per month.
- Compare that to the seller’s offer to purchase 2.5 discount points (2.5% of the loan) with a $10,000 concession. One point lowers your 30-year fixed mortgage rate by about 0.25 of a percentage point, so 2.5 points would reduce your rate by 0.625 percentage points. You would save $162 a month.
Option 3: Fund a temporary buydown (2-1 buydown)
Another interest rate break is the temporary buydown. One of the most common is the 2-1 buydown. Here’s an example of how this can work:
- The seller deposits enough money to fund a reduced interest rate for two years.
- During the first year, the rate is two percentage points lower than the contracted fixed-rate mortgage. Considering a prevailing rate of 6.5% on a $400,000 30-year loan, that would provide a 4.5% rate, saving the buyer just over $500 a month in the first year.
- For the second year, your interest rate is one percentage point lower. With 5.5% interest, your payment would be over $250 less each month.
- For the third year, and the balance of the loan, you pay the contracted fixed interest rate. In our example, the loan rate would be 6.5%.
This allows the buyer some breathing room with monthly payments in the first two years of a home loan.
Caution: New homeowners should be prepared for the higher payments that follow the buydowns. It may not be possible to refinance to a lower rate, or to expect your income to grow sufficiently to cover the higher payments.
Temporary buydowns of 1 to 3 years are common in new construction financing.
Option 4: Repair credit
Another frequently offered seller concession is the repair credit. It may involve something that was revealed during the home inspection (such as a plumbing issue) or simply a desired upgrade, like new appliances. Cash credits can be issued for painting, flooring, and other cosmetic allowances, large and small.
However, particularly with existing homes, lenders may require the work to be completed before closing to meet appraisal requirements, so lender credits at closing may not be accepted.
Decision framework: Which use is best for you?
Are seller concessions worth it? From the examples shown above, you can see that they definitely can be very valuable. It’s a matter of considering options, negotiating to gain the best advantage without breaking the deal, and discussing the possibilities with your real estate agent and lender.
For example:
- If a lower mortgage rate makes your projected monthly payments more comfortable ➜ a permanent rate buydown can be an attractive choice.
- If cash is tight ➜ seller concessions may be best used by applying them to closing costs.
- If you need a monthly payment break for the first couple of years ➜ a 2-1 buydown may be your best option.
- If the home needs work or upgrades ➜ a repair credit may be worthwhile.
- If you’re unsure ➜ ask your lender what works best with the specific loan you’re pursuing.
How to negotiate seller concessions
Whether you’re a buyer or seller, you can benefit from seller concessions in your next real estate transaction. However, there’s an art to crafting a deal that benefits both parties.
1. Know when a seller is likely to offer concessions
There are hints to look for to let you know when a seller is likely to offer concessions:
- Days on the market. If a listing has aged well beyond the neighborhood average, a seller may be open to negotiation.
- The price has been reduced. The seller is adjusting their expectations.
- The listing includes urgent notices. Look for phrases such as ‘motivated seller,’ or ‘bring all offers.’
- The house is empty. If the owner has already moved, they may face additional expenses and be willing to negotiate.
2. Check your market for important signals
Your real estate agent can help you get a clear picture of the local real estate market. By gathering data on average sale prices, seller concession trends, and housing inventory, an agent can help you understand current market conditions.
Remember, nationally, nearly half of sellers have offered concessions recently. That trend could be even more pronounced in your market.
3. Remember loan concession limits
Know the loan limits for seller concessions for the mortgage you are using, then be specific, firm, but reasonable in making an offer. Remember, you can’t pocket any excess seller contribution beyond closing costs. If you can’t come to a fair agreement on reasonable and justifiable seller concessions, either party can walk away.
How concessions affect the seller
Seller concessions are the result of a fundamental change that’s occurring in the housing market. These cash incentives generally come into play in two phases of a real estate transaction: during the home listing itself or during the offer and inspection phase.
No matter the timing, however, the outcome is the same: a dollar-for-dollar reduction in net proceeds for the seller and reduced costs for buyers at the closing table.
Concessions in a home listing
Sellers sometimes offer concessions in the home listing itself to help their home stand out to potential buyers. While it might seem counterintuitive to offer this type of discount before someone has set foot in the house, the move can make perfect sense in several scenarios.
For example, a homeowner is ready to sell but knows the roof or carpet needs replacing. Instead of making the repair, the seller may offer a flat-rate concession to cover the repair cost — say $6,000 for carpeting or $30,000 to replace the roof.
If it’s a buyer’s market and sellers want to make their home stand out, they may offer a percentage of the sale price as an upfront concession. For instance, let’s say the house has a $500,000 list price, and the seller wants to entice buyers with a 3% seller concession rather than reduce the home’s price. In this case, the seller would contribute $15,000 to the buyer’s closing costs — a move that could speed the path to better offers and a faster closing.
However, because of the growing number of buyer’s markets, some sellers are doing both. Redfin reports about 15% of homes sold in August had both a price drop and a seller concession — another May record.
Concessions in the offer and inspection phase
If you don’t see an advertised seller concession, all isn’t lost. Buyers and sellers can also agree to concessions at the offer and home inspection phases.
For example, a home for sale has lime green paint in all the bathrooms. Here, a buyer may make a full-price offer and propose a seller concession to cover the costs of repainting the rooms. On the other hand, maybe you have an accepted offer, but the inspection reveals termite damage to a shed in the backyard. In this case, you can negotiate a seller concession to cover the exterminating costs or removal of the shed.
No matter how seller concessions come about, they all work the same. At closing, the concession amount gets deducted from the seller’s proceeds and applied to the buyer’s closing costs. Buyers pay less at closing (leaving more cash in their bank account), and sellers don’t have to come up with cash to cover the negotiated amounts.
How builder concessions work
Developers selling new-construction houses frequently offer concessions. In fact, nearly two-thirds (62%) of builders offered cash incentives in June, according to the National Association of Home Builders.
Using “preferred lenders,” builders often offer loan packages with permanent or temporary rate buydowns, rather than price reductions, to protect the value of comparable listings. Closing cost credits are also prevalent, with builders offering to cover lender origination fees, escrow costs, title insurance, and more.
The most aggressive developers, anxious to keep subdivision projects growing, will also offer upgrades, such as premium countertop materials, high-end appliances, and preferred lot locations.
As with all concessions, particularly builder-paid 2-1 buydowns, be aware of future payment costs once the temporary rate break expires. And compare preferred lender fees with those of an independent lender to ensure you’re getting the lowest all-in financing costs.
A seller concession is an umbrella term for any financial or non-financial incentive a seller provides to close a deal. This includes rate buydowns, home warranties, or repair allowances. A seller credit is a specific monetary type of concession where the seller contributes cash directly toward the buyer’s closing costs at the settlement table.
No. Lenders strictly prohibit seller concessions from being applied toward a buyer’s down payment. Conventional, FHA, VA, and USDA guidelines require down payments to come directly from the buyer’s validated funds. Concessions can only be applied to eligible closing costs, prepaid expenses, or interest rate buydowns.
Any unused concession amount is forfeited. Under mortgage underwriting rules, total seller concessions cannot exceed your total actual closing costs and prepaid fees. The seller cannot give you cash back at closing for any leftover allowance.
Maximum allowance caps depend on your loan type and down payment size:
Conventional (Primary Home): 3% cap for down payments under 10%; 6% cap for 10%–25% down; 9% cap for down payments over 25%.
FHA & USDA Loans: Capped at 6% of the purchase price or appraised value (whichever is lower).
VA Loans: Capped at 4% plus standard, customary VA closing costs.
Investment Properties: Capped at 2% regardless of down payment.
For most buyers financing a home, a rate buydown provides greater monthly savings than an equivalent price cut. On a $400,000 home at a 6.5% interest rate, a $10,000 price drop saves roughly $63 per month, whereas using $10,000 as a concession to buy down the mortgage rate (2.5 discount points) drops the rate to ~5.875% and saves roughly $162 per month.
Suresh holds a Master of Commerce (M.Com) degree and is a dedicated personal finance researcher and writer. Combining his advanced academic background in commerce with deep industry research, he covers complex topics like taxation, banking systems, credit analysis, and personal finance strategies. As the founder of Tax Assistant (taxassistant.org), Suresh is committed to translating complicated financial guidelines and economic data into simple, accurate, and actionable educational resources for everyday readers.
