A Guide to Sellers Concessions
A Guide to Seller Concessions
If you’re in the final stages of buying a home, you’re probably preparing yourself for some steep closing fees. After all, these can be anywhere from 2% to 5% of your home’s price. Fortunately, you have the option of the seller paying for some of the closing costs. This is known as seller concessions. Here’s what you should know about the process and the pros and cons of seller concessions.
How Seller Concessions Work
Seller concessions usually fall into one of two categories. In some cases, the seller will cover specific costs associated with closing. Other times, they will cover a certain percentage of your closing costs, and you can use that money toward whichever costs you’d like. Sellers can never pay 100% of the closing costs. The amount of concessions that a seller can pay will be determined by the type of loan you’re using to buy your home.
There are certain closing costs that can be covered by seller concessions. Examples of these are:
- The appraisal fee
- Inspection fees
- Attorney fees
- Property taxes
- Title insurance
- Recording fees
- Loan origination fees
- Discount points (aka mortgage points)
Your real estate agent can help you determine what fees you might be able to ask the sellers to cover.
The Pros and Cons of Seller Concessions
Of course, seller concessions are great because they cut down on your closing costs. There are already so many costs associated with buying a home that every little bit helps. If a property has been on the market for a while, a seller will probably have no problem paying for the concessions if it means they can finally take their house off the market.
That being said, there are also drawbacks to asking a seller to cover some of the closing costs. It could immediately be a turnoff to the seller. If a seller has gotten multiple offers on their home—some with concessions and some without—the potential buyers asking for concessions probably won’t win out. If seller concessions are important to you, it’s a good idea to limit your other demands to increase your chances of getting the home you want.
In addition, sometimes closing costs will be included in your mortgage if there are seller concessions. Because of this, seller concessions could lead to your mortgage actually being higher. However, if you’re willing to pay more in the long run for a bit of a financial break right now, seller concessions still might be the best choice. It will just depend on your individual circumstances.
You’ll discover your estimated closing costs when you apply for your loan and your lender gives you a loan estimate. At that point, you can weigh the pros and cons of seller concessions and decide whether or not you want to ask the seller for them.