Homebuyers

Seller Concessions: What Are They and When Should You Ask for Them?

There may be a glimmer of light for homebuyers who might feel stretched thin from years of skyrocketing prices and mortgage rates. Cooling housing markets in some parts of the country have left sellers more willing to make concessions. 

Sellers eager to see their homes move, particularly if the property needs some work or falls outside of hot ZIP codes, might be willing to sweeten a deal for on-the-fence buyers.

These concessions typically come in the form of paying down closing costs or offering to buy down the buyer's mortgage rate for the first year or two of their loan. 

Redfin reports that more than a third of all home sales in the U.S. came with seller concessions in fall 2023. In formerly white-hot markets like Austin, Texas, and the state of Florida, savvy sellers are offering more and more to help nudge buyers toward a deal.

"We went from the absolute hottest market in the country to things slowing down significantly, to where I would say we're currently at a normal market," said Brad Pauly, owner of Pauly Presley Realty in Austin. "[We're seeing] longer days on the market, more inventory but not inundated with inventory. So, there's more opportunities for buyers in the market."

What are seller concessions?

Let's start with the obvious, what exactly are seller concessions? The term is a broad one, covering any agreement to lower costs for the buyer outside of a straightforward drop in the price. 

Common seller concessions include mortgage-rate buydowns, where a seller agrees to pay to temporarily lower a buyer's mortgage rate. Contributing to a buyer's closing costs is also another example.  

In the latter, sellers may offer to cover a flat percentage of the purchase price toward closing costs like title origination fees, inspections, and associated taxes. Particularly motivated sellers might even offer to cover closing costs entirely. 

"We are seeing lots of seller concessions, whether it's paid closing costs or rate buydowns to make interest rates more bearable for the first couple of years," Pauly said. "I let every seller know that a buydown is going to be part of the marketing plan."

Which concessions might be offered on a case-by-case basis? They may include providing money to cover necessary repairs on a home that's seen better days or purchasing a warranty on the home covered by the seller for a set period.

When should you ask for seller concessions?

The cooling market has reduced the number of pandemic-era sellers who listed their homes to take advantage of record purchase prices. Combine that with higher interest rates keeping more prospective homebuyers on the sidelines and the market is ripe for sellers offering concessions to make their property easier to sell.

The embrace of concessions isn't only for current homeowners looking to sell. Homebuilders are becoming more comfortable with concessions too.

Nearly 60% of builders reported offering seller incentives on their new homes in May, according to the National Association of Home Builders. But not all markets are created equal.

It's important to remember that real estate operates locally. As such, prospective homebuyers shouldn't take sellers' concessions as a given. 

Move-in ready homes with obvious curb appeal are likely to have multiple offers with buyers asking for concessions more apt to have their offer dismissed out of hand. The same goes for homes in popular neighborhoods and listings in good school districts. Competition dictates that buyers should put together the best possible offer they can muster for those properties. 

However, if a home has been on the market for quite a while, is in significant need of repair, or sits outside of booming areas, sellers should consider taking a shot at lowering their overall costs through concessions.

How to ask for seller concessions?

Homebuyers should broach the topic of concessions with their agent before they make an offer.

Pauly advises all of his clients to "keep it simple" when asking for help with costs or high rates. He says agents should lock in the purchase price first before asking for additional help.

"You start by trying to get the absolute best price that you can. Once I've already negotiated the best I probably can, I say 'We also want a concession,'" he said. "It's important to not be negotiating on multiple fronts at once."

Pauly adds that throwing too many numbers (and reductions in the overall price) at a seller can lead them to throw up their hands and walk away from a deal. 

"It's already an emotional time for most buyers and sellers, so keeping it simple is paramount," he said.