Seller concessions in contracts.

Real Estate Agent with Aspen Properties, Inc. BR511793000


Seller Concessions in Contracts.

Let’s start by defining Seller concessions.  Seller concessions are generally a financial contribution from the seller to be applied to some of the pre-paids and closing costs for a buyer who is acquiring a loan to purchase property.   In recent years this has been a common practice, particularly for buyers who were purchasing foreclosure property.  The banks were willing to contribute a certain percentage to those costs to facilitate a quick sale and disposition of the asset. Lenders who were originating loans for buyers encouraged them to ask for those contributions and understandably, since they knew the banks were willing to pay them.

 However, with the foreclosure market drying up, buyers are now making offers on properties that are privately owned, not bank owned, and the sellers are not as open to paying those costs for the buyers.  They don’t feel they should have to pay them since they are already taking less than they would like for their properties.  While the lenders may still be encouraging buyers to ask for them, if you don’t need them, don’t ask. 

The reason is really pretty simple.  There aren’t as many homes on the market and the sellers know that even if they lose your offer, there is likely to be another coming along very soon.  Sellers are just coming out of a tough time too.  Many may just have regained enough value in their properties to sell them at a slight profit or at the very least get them out from under their existing mortgages.  They may not have a lot of room to negotiate those terms, even if it means losing the sale.   

There are loan products like FHA and VA that require some contribution from the seller.  Fees that the buyer cannot pay.  However they aren’t terribly high so try and confine your requests to the amount needed, not more.  This will mean your chances of getting your offer accepted is greatly increased.  Sellers who are open to these types of loans, and not all will accept Government loans, are prepared for those minimal costs.  Depending on their circumstances though, they may not be willing to accept an offer that asks for more than the minimum contribution.

The market conditions are changing constantly and what was true a year ago, even six months ago, may no longer be true.  With the shift from the foreclosure market to a private market, so too have the offer requirement to be sure your offer is looked on favorably.   Buying or Selling a piece of property is a cooperative effort.  The objective is to have both parties get what they want.  The buyers want to buy and the sellers want to sell.  Working for the best terms possible for both parties will facilitate a smoother transaction.  Both parties come out winners in the end.

Thanks for reading, until next time……

Sandra Paulow, Associate Broker, GRI, SFR, REALTOR®  928.242.0300

Posted by

Sandra J. Paulow, Associate Broker, GRI, SFR, REALTOR®

Pinetop, Arizona

(928) 242-0300


If you are looking to Buy or Sell Property in the White Mountains of Arizona, give me a call.  I have been listing and selling in this area since 2002.  With over 16 years of experience I can assure you I know how to treat a client.  For Service you expect and deserve, call Sandra Paulow. 




Re-Blogged 2 times:

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  2. Winston Heverly 02/19/2014 04:29 AM
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Karen Steed
Tallapoosa, Bremen, Waco, Buchanan, Temple, Carrollton - Tallapoosa, GA
Associate Broker Haralson Realty

I am in a situation where the buyers need to ask the seller to contribute toward VA required repairs, in an amount higher than agreed to when we wrote the original contract.  The repairs turned out to be higher than anticipated.

We are currently getting estimates so, at this point, who knows what that amount will be.  At this point, I am keeping my happy face on, and I hope we can get this worked out so everyone can be somewhat happy, and a vacant home can have a new live in owner.

Nov 22, 2013 04:00 AM #56
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

Interesting comments you've gotten here. It looks, once again, like things are different in different real estate markets. 

Nov 22, 2013 05:16 AM #57
Gayle Rich-Boxman Fishhawk Lake Real Estate
John L Scott Market Center - Birkenfeld, OR
"Your Local Expert!" 503-755-2905

Sandra, a very well-written piece, I must say. You brought us up to speed admirably from a definition to what is now pertinent and finished it off the way I like to do every transaction, where even though there is compromise, everyone walks away feeling that they've won.


Nov 22, 2013 07:24 AM #58
Aaron Jay
City of Trees Realty - Chico, CA
-Keepin' it Real...Estate!-

Good topic.  Thank you for your thoughts, lots of good comments.

Nov 22, 2013 07:45 AM #59
Sandra Paulow
Aspen Properties, Inc. - Pinetop Lakeside, AZ
REALTOR, Associate Broker, GRI, SFR

You have all been great.  I like hearing about markets in other areas.  One thing is quite evident from all the different takes on this subject, markets are most surely local.  Thanks everyone for all the feedback and helping to make this blog a featured one.  That is such a nice reward. 

Nov 22, 2013 08:07 AM #60
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team
Great post Sandra, we really don't like lenders recommending seller concessions. And obviously on resales sellers have a real distaste when they have to pay their closing costs, and are asked to pay buyer closing costs.
Nov 22, 2013 08:58 AM #61
Jared Garfield
Rich Life Real Estate Team - Buford, GA
Invest With The Best For The Highest Returns!


I think you make some good points, but it very much depends on the market, which varies so much across the country.  Depending on whether the property is priced at the top of the market or priced well already and also depending upon the number of competing offers, some buyers really need to have the closing costs paid, or they won't be able to close the deal.  No agent should recommend that the buyer ask for closing costs on every deal, it should always be according to the deal.

Nov 22, 2013 09:24 AM #62
Jeff Fritzson: Frisco Real Estate Pro
Jeff Fritzson Real Estate, Ebby Halliday Realtors - Frisco, TX
Your Success is My Focus!

I would have to agree sort of with comment 54, for the sellers it is all about what they net. How the deal is finally framed or presented is not as important unless it brings in additional risks.For buyers the more concessions you ask for the weaker your offer. In a seller's market that means more missed homes in a multiple bid situation.

Nov 22, 2013 10:20 AM #63
John G. Johnston
John G. Johnston & Associates, LLC - Westcliffe, CO
An Exclusive Buyer's Agent ~ Westcliffe, CO

Sandra  I learn something everyday in the Rain.  Thank you for sharing

Nov 22, 2013 11:58 AM #64
John Juarez
The Medford Real Estate Team - Fremont, CA

Sellers are mostly interested in the net to them after the sale closes. Providing a credit to a buyer who has an attractively priced and well structured offer can still be winner for a seller.

That said, in our current local environment market which is dominated by multiple offers and prices in excess of asking there are very few requests for seller credit since it reduces the amount of the net to the seller.


Nov 22, 2013 12:08 PM #65
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

I'm with Marti, #48 on this issue. A qualified buyer is one who has the resources to buy the property without any concessions due to funding. Only a distressed seller would accept such terms and in today's market, that's not likely at all, don't you agree?

Nov 22, 2013 02:35 PM #66
Yvette Chisholm
Long & Foster Real Estate, Inc. - Rockville, MD
Associate Broker - Rockville, MD 301-758-9500

Offers are always more competitive without concessions and adding the money back to the sales price, definitely hurts the chances of the property appraising.

Nov 22, 2013 09:36 PM #67
Jeff Fisher
RE/MAX Fine Properties - Scottsdale, AZ
RE/MAX Fine Properties

Great post and great dialogue with the comments. Always fascinating to hear from others on a topic!  

Nov 22, 2013 10:13 PM #68
Tracy Santrock
Fonville Morisey/Santrock Realty Group, Inc. - Cary, NC
Raleigh - Cary Realtor/Broker In Charge

I agree that supply is down in the market.  We ar seeing less and less concessions and more and more bidding wars in today's market.  

Nov 22, 2013 11:27 PM #69
Jimmy Faulkner
Florida. Homes Realty & Mortgage - Wantagh, NY
The Best Of St. Augustine

You do have to explain to the seller that their net does not change when the seller makes a buyer concession. The seller will worry about the bank appraiser and that needs an explaination.

Nov 23, 2013 12:20 AM #70
Aaron Hofmann
Atlanta Communities - Smyrna, GA
aka Mr. Smyrna Vinings

I always explain to sellers that it's just a net number. If someone offers you $195 and asks for no contributions, that's the same as a buyer that offers $200K and asks for $5K in contributions. At the end of the day, seller gets the same amount, but for some buyers they need to finance their closing costs. Buyers aren't getting anything for free because the sellers aren't giving them anything. It's just a re-allocation of the numbers.

Nov 23, 2013 05:13 AM #71
Ric Mills
Keller Williams Southern Az - Tucson, AZ
Integrity, Honesty, and Vast Real Estate Knowledge

The shift is on.  With low to normal inventories, it is tough to get concessions unles you bump the purchase price up to accomodate them.  The killer offer is one with a discounted price and seller concessions....dream on.  Do the comps and advise your buyers wher the offer should be and things will go much smoother.

Nov 24, 2013 12:27 AM #72
Rodney Mason
Angel Oak Home Loans - Atlanta, GA
AL, FL, GA, SC, & TN

In your first sentence, you said "seller concession", but it seems at though you are really talking about "seller contributions."  A "Seller Contribution" is defined as a monetary amount that the Seller has agreed to contribute toward a Buyer's Closing Costs/Pre-Paids.  This is typically 2-6% of the sales price.

A "Seller Concession" is something completely different.  Generally, Seller Concessions are prohibited within lendng guidelines.  This is defined as an inducement or an incentive to purchase.  They may include cash, furniture, automobiles, decorator/carpet allowances, moving costs, and other giveaways, as well as financing concessions that exceed HUD/Fannie Mae/Freddie Mac limits. When these exist, the value of sales concession must be deducted dollar for dollar from the sales price when calculating the maximum LTV ratio for underwriting eligibility.

In regards to fees for an  FHA mortgage, the Tax Service Fee is now the ony thing that HUD does not allow the Buyer to pay.  With a VA mortgage, there is a list of common fees that HUD will not allow the Buyer to pay.  If the Seller does not agree to pay them, then the Buyer will need to take a higher interest rate for the lender to be able to cover those expenses.

In the Atlanta market, we have A LOT of First Time Home Buyers.  A good majority of them need the Seller Contributions in order to be able to purchase the home.  If the Seller does not agree, the Buyer wll have to move on to another property where the Listing Agent has done a good job in setting expectations for the offers in our market. 

When reviewing an offer, the Seller really should ony be concerned with their net.  The Listing Agent should explain to them that a $200,000 offer with no seller contributions is the same as a $205,000 with $5,000 being paid.  I know there are some Sellers who stand on principal of not paying anything, but lets hope they are in no hurry to sell.  That Listing Agent may have their work cut out for them with that property.

Nov 24, 2013 01:57 AM #73
David Demangos
Keller Williams Realty Carmel Valley / Del Mar - San Diego, CA

Yes, buying and selling is a cooperative agreement.I wonder how many agents have actually lost getting their offers accepted due to higher demand with so much competition.

Nov 24, 2013 04:23 AM #74
Don Taber
Our Town Properties, Inc., Wilson, NC - Wilson, NC

Sandra, Most buyers seem to want to ask for everything.  Fortunately, most sellers are prepared for that.  That is why so many sellers want to ask more for their property than they should.  They all "want some room to negotiate".  I do understand that mentality, I have done it myself.  Unfortunately, it does seem to keep the cycle going.  Maybe sometime soon we will be able to get back to some sanity.

Nov 24, 2013 01:26 PM #75
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Sandra Paulow

REALTOR, Associate Broker, GRI, SFR
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