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What are seller's concessions?

Written by Posted On Thursday, 21 September 2017 17:45

Recently I had a seller very confused about seller's concessions.  In real estate like most business's we have our own terminology for the real estate business.  So whether you are selling a lake home in Oakland County or any home understanding the concept of seller's concessions is important.  So what are seller's concessions?  When a buyer does not have much money to buy a home, the buyer sometimes ask the seller to pay some or all of the closing costs.  Many times the buyer could not buy the home without the seller's concessions.  They just do not have some of the money or all of the money to pay for the mortgage closing costs, the escrows, pre-paids, or insurance.  They want to buy your home, but do not have the money to pay for it all.  So what do you do?

My client said that I should also explain seller's concessions as a seller credit.  You are giving the buyer money to pay for their closing costs.  The amount of the seller's concessions that the buyer is asking for is coming off the purchase price.  It is a negative amount coming off of the total amount of what you are selling the home for.  Many seller's get high handed right away and say no way am I going to give the buyer the money to buy a house.  But if you are a seller that wants to sell your home then you need to think about giving the seller's concessions.  If you have no other offer then you should at least look at the math of what you would net after seller's concessions.  After all you want to sell the home right?

Ok, let's go over a couple of scenarios.  You have the home listed at $250,000.  The buyer comes in with a full priced offer of $250,000, but wants $6000 in seller's concessions to cover closing costs, escrows, pre-paids, and insurance.  So if you do the math $250,000 offer price - $6000 you get $244,000 as a net price.  That is what the true offer is.  You are going to pay $6000 out of your proceeds to pay for the buyer's closing costs.

So what happens if you say no to the seller's concessions or cut them in half to $3000.  Here lies the tricky part.  The buyer may not have the money to close the loan.  They may not have the $6000 or even half the amount.  Usually the buyer needs the money to close the loan and buy your house.  Most buyers won't ask for concessions they do not need because they have to pay it back with interest.  A smart buyer definitely won't ask for them if they don't need it because it raises their payment up too.  Let's say you wanted to get at least $246,000 for your home in the above example.  In order to get that there are two ways of countering the offer.  You could reduce the seller's concessions by $2000 or you could raise the purchase price to $252,000 and still give the $6000 in seller's concessions so you would net $246,000 still.  It is smarter to raise the purchase price than to take away the concessions.  Many times the buyer just doesn't have the money to close the loan on your home.  The buyer may have to walk away from the deal.  So the smarter counter is to raise the purchase price and keep the seller's concessions as is.

So think of seller concessions as a seller credit.  You are giving the buyer money for closing costs.  You will have a lower net.  Always deduct the seller's concessions from the purchase price to find out what you will net.  If you had multiple offers you would do the same thing.  Using the same $250,000 list price let's say you got three different offers.  A $248,000 offer with no concessions.  The second offer is full price $250,000 but with $6,000 seller's concessions....a net of $244,000.   The third offer is $255,000 with $6000 in concessions....a net of $249,000.  So the decision would be in your court.  Would the house appraise for $255,000 or would it appraise lower?   Let's say you priced your home at the top of the market.  For the extra $1000 you may get  you are taking a big chance.  If the house only appraised at $252,000 and you had to give $6000 in seller's concessions your net would be $246,000.  It is a safer bet to go with the full price offer of $248,000.

I hope I explained what seller's concessions are.  My goal as your listing agent is to get you top dollar for your home.  If you do not understand what seller's concessions are then you may agree to a purchase contract that you did not fully understand.  At closing you would be walking away with less money than you thought.  That is not the scenario you want.   For more information about selling your home go to


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