Seller Concessions Can Sweeten a Deal. Here’s How Both Buyers & Sellers Can Benefit from Them.
When you’re buying or selling a home, negotiating the purchase price can be tricky. Sometimes, those negotiations deadlock. That may mean the deal never closes, but it can also open up the opportunity for seller concessions.
In fact, when home buyers and sellers can’t see eye to eye on the terms of the deal, seller concessions can introduce more favorable terms for buyers, possibly moving the deal closer to closing. That could be a win for sellers too — as long as the right concessions are made.
What Are Seller Concessions in Real Estate?
Seller concessions are the “gives” or compromises that a home seller makes with the intent of:
- Offsetting the cost of the home in some way for the buyer
- Enticing the buyer to purchase the home by making the deal a little sweeter for them in some way
To do that, seller concessions can specifically involve:
- Covering fees that buyers would pay: In many cases, these fees are the closing costs, which include the fees and expenses associated with appraisals, home inspections, insurance, loan fees, title insurance, and more. Buyers and sellers tend to have their own closing fees, with buyers usually shelling about ~2% to 6% of the purchase price for closing fees; in contrast, sellers tend to pay ~5% to 10% of the purchase price in closing fees. Nevertheless, sellers can offer to cover some or all of the buyer’s closing costs as a concession to help close the deal.
- Completing specific repairs or home improvements: If some part of a house is dated or in disrepair, sellers can offer to fix, upgrade, restore, or replace the item(s) in question as another form of concession to buyers. For instance, sellers may offer to replace an electrical box, repair the house’s roof, or upgrade kitchen appliances to energy-saving models. These types of seller concessions tend to arise after home inspection reports are available, revealing deeper potential issues about a house.
- Including certain items in the purchase price: Furnishings, either some or all of them, may be offered up as a concession too. This can include anything from living room and bedroom furniture to artwork, lighting, outdoor furniture, and more.
- Agreeing to certain terms the buyer needs: When buyers need certain timing with escrow or certain contingencies built into the purchase agreement, this can be a persuasive concession for sellers to offer up. Often, this type of seller concession arises with buyers who are also selling a home and need to time their purchase and move around the other transaction they’re dealing with.
Keep in mind that sellers may offer one or multiple concessions. Generally, greater concessions come into play when:
- It’s a buyer’s market.
- Sellers need to offload homes fast for any reason.
How Seller Concessions Work
When seller concessions are part of the deal to buy a house, here’s how the process usually works:
- After the home inspection and appraisal, negotiations to buy a house get underway.
- As the negotiations occur or when they hit a standstill, the seller may offer certain concessions, OR the buyer may ask the seller to make certain concessions as a way to move both parties closer to mutually agreeable terms. At this stage, there can be multiple rounds of negotiations, with some back and forth as buyers and sellers work out the specifics of the concessions in question.
- If the buyer has requested seller concessions, the seller has the opportunity to review the request and agree, counter with new concessions, or reject the request entirely. Alternatively, if the seller has offered the concessions, it will be up to the buyer to review those and decide whether to agree, counter, or reject the offered concessions.
- When buyers and sellers come to an agreement about any seller concessions, those will be detailed in the purchase agreement. Here, it’s crucial that buyers and sellers both carefully review the final purchase agreement that’s drawn up, including the terms regarding concessions, to ensure they’re accurate and complete before signing the contract.
- As the sale closes, the seller will follow through with whatever concessions have been agreed on, covering certain costs or complying with the specified terms in the purchase agreement.
7 Tips for Successfully Handing Seller Concessions
If you’re selling a house, here are a few insider tips to keep in mind when it comes to seller concessions:
- Know exactly what it’s going to cost you: If you want to offer to pay certain closing costs, calculate the exact fee and figure out how much that’s going to dip into any profits you could make from the house. Crunching some numbers quickly can help you figure out how much is too much to cover if you’re going to shell out some cash as part of a concession.
- Think outside the box: What does a buyer need or want in their next house? How can you help provide that? For example, some buyers may need you to vacate the house sooner than you planned. If you can meet their timing needs, that could be a major factor in swaying their decision. So, remember, it’s not always all about money when you’re offering seller concessions. You can get creative, and focusing on the buyers’ needs can help you discover alternative concessions that can be highly attractive to prospective buyers.
If you’re buying a house, here are some pro tips for working out favorable seller concessions:
- Be respectful: Politeness and professionalism can make for smoother negotiations. After all, if you’re rude or disrespectful, you’re probably going to have a harder time convincing the seller to give you what you want in the deal.
- Get ready to negotiate: Sellers are not obligated to agree to your request, so be prepared to negotiate.
- Keep it realistic: No one wants to be taken advantage of when they’re selling or buying a house, and asking for too much can be insulting. So, keep your concession requests realistic. If you’re not sure what’s realistic, talk to a real estate agent.
- Remain flexible: Come to the table open-minded and willing to give and take a little, instead of having an all-or-nothing attitude. If you’re open to different options and willing to shift gears a bit to meet sellers closer to where they’re at, you may be able to work out some concessions that are a win-win for you and the seller.
- Know your bottom line: What’s pivotal to getting a “yes” from you in the deal? What fundamental “gives” do you need a seller to make for you to agree to the purchase? Make sure you have a clear idea of these are upfront, before you start negotiating, so you can keep a steady eye on the prize while also knowing when enough is enough.
Seller Concessions & Buying Homes in Texas: The Bottom Line
With purchase agreements and seller concessions, the bottom line is that:
- Not every deal to buy a house will involve seller concessions.
- Some sellers will NOT be willing to make concessions.
- Seller concessions are totally negotiable, and they can be unique from transaction to transaction.
- Working out seller concessions can be tricky, but a little know-how can help a lot.
An experienced Realtor® can guide and advise buyers and sellers during negotiations, helping them with concessions and every other detail that’s key to closing the deal.
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