Seller concessions refer to an agreement in which the seller pays certain financing costs for the buyer of the home.

i.e. Title insurance, Processing fees, Origination fees, Inspection fees, Transfer taxes

The purchaser may request seller concessions during contract negotiations, or the seller may offer a concession during the listing process. Negotiations for seller concessions often used in a buyer’s market, often reduce the overall purchase price of the property; in a seller’s market, a buyer may ask for an increased purchase price to offset the requested seller concession.

Example:

A home inspection may reveal repairs necessary, a seller may offer a concession to offset these repair costs as a way to help a buyer who may be unwilling or unable to afford the expense.

Another example:

A seller concession involves a seller agreeing to pay a certain percentage of the buyer’s closing costs, thus reducing the buyer’s out-of-pocket costs. 

These can differ with each financing type or transaction purpose. i.e. primary residence, second or vacation home or investment property.

FHA and Rural Development: 6% of the purchase price is the MAXIMUM seller concessions to be used for closing costs and prepaid items.

Conventional Financing: 6%  MAXIMUM  seller concessions for a 10% or more as a down payment.

If the transaction is less than 10% down payment, the  MAXIMUM  seller concession is 3% of the purchase price.

If the borrower is putting 20% or more as a down payment the MAXIMUM seller concessions will increase to 9% MAXIMUM allowable concessions.

Conventional Financing for an investment property will be limited to 2% of the purchase price

 

 

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