Understanding Seller Concessions: What Are They and How Do They Work?

Seller concessions are credits a seller agrees to pay toward the buyer's eligible closing costs, taken out of the seller's proceeds at closing. That is, they cut the cash you need to close.

The purchase price stays the same. We're Bentley's Real Estate, and our agents negotiate these credits for buyers and sellers across Greater Newburyport.

What seller concessions can and cannot cover

That credit has a narrow job: it pays the costs of getting the mortgage and closing the deal, never cash in your pocket or your down payment.

Can cover	Cannot cover
Loan origination and lender fees	The down payment
Appraisal and inspection fees	Cash back to you
Title insurance and attorney fees	More than your actual closing costs
Prepaid property taxes and the first year of homeowners insurance	Items your loan program won't allow
Discount points to buy down your interest rate

Start by asking your lender for a Loan Estimate. It lists your total closing costs line by line, so your request ties to real expenses.

How seller concessions work from offer to closing

With that estimate in hand, you put the request in your offer. Once the seller agrees, the contract states the amount as a dollar figure or a percentage of the sale price.

In Massachusetts, that term lives in the Purchase and Sale Agreement, which your attorney reviews. On closing day, the credit appears as a line from seller to buyer, and the seller's net drops to match.

And your mortgage doesn't shrink.

On a $300,000 home with a $6,000 credit, you still finance against $300,000 but bring $6,000 less to the table.

When your closing costs come in under the credit, the extra typically goes back to the seller. Ask your lender whether the leftover can go toward discount points instead.

Seller concession limits by loan type

How much room you have depends on your program, since each one caps the seller's share and the underwriter trims the excess.

Program	Down payment or use	Cap
Conventional (Fannie Mae / Freddie Mac)	Under 10% down	3%
Conventional	10% to 24.99% down	6%
Conventional	25% or more down	9%
Conventional, investment	Any	2%
FHA	Any	6%
VA	Zero down allowed	4%, plus standard settlement charges
USDA	Zero down allowed	6%

Limits change, which is why we confirm the current cap with your lender first.

Seller concession vs. price reduction

Once you know your ceiling, ask whether a credit is the right move at all. Both options cost the seller about the same and help you in different ways.

	Seller concession	Price reduction
Your cash at closing	Smaller	Unchanged
Mortgage and monthly payment	Unchanged	Smaller
Recorded sale price	Stays higher	Drops
Effect on future comps	Supports neighborhood values	Sets a lower comp
Appraisal risk	Must appraise at the full figure	Easier

Seems like a lot of rows, but it comes down to one question. Choose a concession when cash to close is your pinch point.

Choose a reduction when the monthly figure matters more. The tradeoff: a credit helps on day one, while a cut helps every month you own the house.

When asking for a concession makes sense

If day one is where you feel the squeeze, timing decides the answer. Asking works best when a listing has sat, taken reductions, or hits a slower season.

• Upside: less cash to close, more savings left for moving, and a possible rate buydown that lowers your monthly payment
• Downside: a weaker offer in a competitive market and a larger loan than a price cut would leave

When offering a concession makes sense

Sellers see that calendar from the other side. Offering a credit works best when you want to hold your price and reach strong buyers who need help with closing costs.

• Upside: your recorded sale price holds, more qualified buyers can afford to make an offer, and the sale may close sooner
• Downside: lower net proceeds and extra appraiser attention on large credits

Before agreeing, we run a net sheet both ways.

Then we compare net to net.

Tax and legal questions

For most buyers, a seller credit is part of the purchase, not income. Investment property and prepaid taxes can differ, so check with your tax professional and attorney.

How Bentley's Real Estate structures concessions

Those professionals handle the fine print; our agents handle the negotiation. We weigh a credit against a price reduction using recent local sales data, coordinate with the buyer's lender so the credit fits the loan limits, and keep the terms clear in the Purchase and Sale Agreement.

Bentley's has been the #1 brokerage in Greater Newburyport by market share seven years running.

Weighing a concession on your next offer or listing? Call us at (978) 572-1200.