With home sales prices lagging behind asking prices, the tide has turned from a seller’s market to a buyer’s market. According to Redfin, sellers are listing homes at a median price of $469,729, which is 9% higher than the median sales price of $431,057.
As a homebuyer, it may be tempting to offer a lower amount than the listing price. Offering less, however, may not always be the best way to save money. In some circumstances, paying the listing price or higher while negotiating seller concessions could be the savvier move.
Understanding how seller concessions work can help you find the most affordable path to homeownership.
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What Are Seller Concessions?
Seller concessions involve getting the seller to pay some or all of your closing costs or other expenses that go into buying a home. For example, the seller could pay the property taxes or the fees that come with an appraisal, inspection or loan origination.
You may also put seller-provided cash toward a private mortgage insurance (PMI) buyout or discount points to snag a lower mortgage rate. Another option is using seller concessions to pay for repairs or renovations in the home.
Note that sellers can’t put money toward your down payment. There’s also a cap on seller concessions that ranges from 3% to 9% of your purchase price, depending on the type of loan and property.
Otherwise, seller concessions are up for negotiation — you can work with your agent to determine which costs you want to ask the seller to cover.
Pros of Seller Concessions
Seller concessions can help reduce the cash you must bring to closing. If the seller is covering some of your closing costs, you can pay less upfront and avoid draining your savings account. Having more cash reserves could make it easier to get approved for a mortgage.
Plus, you may be able to increase your down payment, which could potentially help you avoid private mortgage insurance, or PMI. Using concessions toward a PMI buyout may also be an option, allowing you to avoid this monthly cost even if your down payment is less than 20%.
Cons of Seller Concessions
One downside of asking for seller concessions is that it might make you a less competitive buyer. In a multiple-bid situation, sellers will likely opt for the offer that makes fewer demands and nets them the best return on investment. But if the competition is low, you may have a better chance of having your offer accepted, especially if the seller is motivated to make the sale.
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Why Would a Seller Pay Closing Costs?
In a competitive seller’s market, you may be hard-pressed to find a seller who’s willing to offer concessions. But in a slow market that’s trending toward buyers, sellers may offer concessions to make their listings more appealing.
“It’s a way for sellers to make their home more attractive in a market like today’s where buyers are stretched by high prices and elevated mortgage rates,” says Kara Ng, a senior economist at Zillow.
A seller may also offer concessions if they’re on a tight timeline and need to close the deal quickly. Additionally, they might prefer concessions over dealing with home repairs or renovations. For example, if an inspection turns up issues with the home, the seller may offer to pay closing costs so you can use the cash you save to handle the repairs yourself.
When Seller Concessions Could Save You Money
In 2025, research from real estate company Redfin shows that buyers are paying an average of 9% less than the asking price for homes. While paying less for a home may sound ideal, there are some scenarios where seller concessions, rather than a lower sales price, could be the most cost-effective approach. Consider the following seller concession examples.
1. Avoiding PMI and Lowering Your Mortgage Rate
Taking out a larger mortgage seems like it would cost you more, but that’s not always the case. Consider the following example of a home listed for $400,000. You might ask for a price cut of 9%, or $36,000, or you might offer full price and ask for $36,000 of concessions.
In the first scenario, you pay $364,000 with a 10% down payment of $36,400. In the second, you pay the original cost of $400,000 but use $6,300 in seller concessions toward a PMI buyout, $14,400 (four discount points) toward a rate discount and the remaining $15,300 toward other closing costs.
You’ll have to make a slightly higher down payment to keep it at 10% — $40,000 rather than $36,400. The second scenario has a higher mortgage amount, but because you used seller concessions strategically, you’d save about $123 per month.
2. Qualifying for Down Payment Assistance
Some down payment assistance, or DPA, programs have requirements when it comes to home loan amounts or loan-to-value ratios. At a lower sales price, a homebuyer may have trouble qualifying for down payment assistance. But if the seller increases the price by $10,000 to $15,000 and covers the difference at closing, the buyer could still get the home while securing down payment assistance. The seller generally makes the same amount on their home either way.
“If there is a minimum loan amount needed to qualify for DPA, this maneuver could make the difference,” says Joel Berner, senior economist at Realtor.com. “If the program pays out as a percentage of the purchase price, then increasing the purchase price would increase the amount of assistance as well.”
However, Berner warns that increasing the purchase price could have the opposite effect and hurt your chances at down payment assistance. For instance, taking out a larger loan could cause you to exceed a DPA program’s price limit or maximum debt-to-income ratio. Make sure to review the ins and outs of a program before going this route.
Consider Whether the Appraisal Supports the Price
In some cases, a buyer may offer a higher price on a home to cover seller concessions. For instance, a buyer may offer $415,000 on a $400,000 home and request that the seller make up the difference in concessions.
The risk of this approach is that the appraisal for the home could come up short. Your home loan eligibility and underwriting calculations are based on the appraisal value, not the sales price, so if the home appraises for a lower amount than you offered, you may have to make up the difference out of pocket.
“If the appraised value of the home doesn’t match the inflated sales price, the loan origination may be at risk,” says Ng. “Aside from financing issues, setting an inflated price for your home may impact property taxes and insurance, which can scale to home values.”
Loan Program Limits on Seller Concessions
Different loan programs may impose varying limits on seller concessions, and some of those limits are based on the size of your down payment. It’s smart to meet with a lender, run the numbers and get preapproved for your scenario before making an offer. You may end up with some combination of concessions and price adjustments.
Here are some lender limits on seller concessions. Concessions that exceed that amount will trigger an adjustment to the sales price for loan-to-value underwriting and eligibility calculations.
Here are Fannie Mae limits:
— For down payments of less than 10%, concessions are capped at 3% of the purchase price.
— For down payments between 10% and 25%, concessions are capped at 6% of the purchase price.
— For down payments of more than 25%, concessions are capped at 9% of the purchase price.
— For investment properties, concessions are limited to 2%, regardless of the down payment amount.
FHA and USDA programs allow seller contributions of up to 6% of the sales price, while the VA allows concessions of up to 4%, plus reasonable and customary loan costs, which include up to two discount points.
Work With Your Real Estate Agent to Put Together Your Offer
In a competitive seller’s market, you don’t have a lot of wiggle room when it comes to purchasing a home. But as the tables turn in favor of buyers, you may have more space to get creative when structuring your offer.
Seller concessions can be a useful strategy for saving money, especially if they help you avoid PMI, reduce your mortgage rate or access down payment assistance. Work with your real estate agent and loan officer to ensure you understand the benefits and any trade-offs when it comes to a seller credit versus price reduction.
“These are complex questions and the advice changes based on each buyer’s personal financial situation, which is one reason it’s so important to work with a great agent and loan officer,” says Ng. “A loan officer should map out the financial options, and from there, your agent can advise on how to make a compelling offer.”
By crunching the numbers with a team of experts, you can make an informed offer that stays within budget while bringing your homeownership goals within reach.
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