Seller concessions (also referred to as seller contribution) is when the buyer asks the seller for a financial contribution towards their closing costs, escrows and pre-paid’s.
Buyer’s may be caught off guard when first speaking to their lender and learning the associated closing costs involved in buying a home. They must prepare by saving enough money not only for a down payment but also to take care of the closing costs and the earnest money deposit too. Without the seller concession, buyer’s may have to wait and save more in order to purchase a home. The seller concession allows the buyer to finance their closing costs into their mortgage by requesting approximately 3%-6% of the purchase price for closing costs (seller contribution) from the seller.
What the seller needs to most consider here is what they will NET from the sale. If the concessions bring the seller’s NET to below a level the seller is content with there is always the possibility to negotiate up in price to bridge the difference. (The buyer increases their purchase price to compensate the seller for the concessions) This allows the Seller to sell while still being able to achieve the NET they are looking for.
Buyer’s have many hurdles in becoming pre-approved through a lender. The seller concessions allows more buyer’s to purchase new homes, turning potential non-prospects into strong and able buyer’s.