Need to Sweeten the Deal? Here’s How Seller Concessions Work in Real Estate

What if there’s a smart game plan to seal the deal on your home sale? In today’s fast-paced market, you need more than just a good listing. Whether it’s pricing it right or making key upgrades, there are many ways to attract buyers. One game-changing move you might not have considered? Exploring seller concession real estate opportunities to sweeten the offer.

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What is a concession in real estate?

As a seller, you hear the term “concession” thrown around in real estate. But exactly what does that refer to?

Put simply, concessions are incentives, like payment for closing costs, necessary repairs, or personal property like furniture that the seller offers the buyer to sweeten the deal and close the transaction. In other words, concession real estate opportunities allow sellers to lock in the sale faster.

So, let’s say you’re selling a property, and the home inspection reveals that the HVAC is totally kaput and will require a $10,000 overhaul. You can offer the buyer a $10,000 credit as a concession to apply at closing.

At first glance, it may seem like concessions always benefit the buyer more than the seller, but that’s not always the case. If you’re hoping to attract offers in a slow market or are motivated to sell quickly, negotiating with concessions helps you close the deal.

In fact, 52% of top-performing agents believe that offering seller concessions and credits helps sellers close deals in a market with consistently high interest rates and cautious buyers.

With our expert-backed primer, you’ll learn the ins and outs of seller concessions, including examples of different types of concessions, when and how to use them, and how they can benefit both sellers and buyers.

What are the types of concessions in real estate?

You’ll see the term “concession” used in two primary contexts in real estate: financing concessions and sales concessions. Let’s dig into what each of these entails.

Financing concessions cover closing costs

A financing concession is when the seller offers to pay a higher portion of the buyer’s closing costs (typically 2 to 5% of the mortgage). Here are some examples of closing costs a seller can offer to cover as a concession:

• Origination fees: The amount the buyer pays their lender for processing the loan application.
• Discount points: Also called mortgage points, these are fees borrowers pay upfront to lower their interest rate.
• Attorney fees: This is payment for the attorney reviewing closing documents and completing the transaction.
• Recording fees: The cost to document the home’s sale with the local government.
• Appraisal fee: This is the amount paid to the home appraiser who determined the property’s market value.
• Inspection fees: This cost covers the home inspection, which most buyers use to learn about the home’s structure and systems.
• Title insurance: This insurance protects the buyer and the lender if a third party makes a claim on the home’s title.
• Property taxes: The taxes a buyer will owe on the home when the purchase is finalized.

A seller may also offer a financing concession to compensate the buyer for a home repair flagged in the home inspection. Mark Pages-Oliver, a top-selling agent who completes 4% more sales than the average agent in Concord, California, explains:

“Let’s say new information was found in the inspection period, and it was a surprise — let’s say it’s an extra $20,000 of repair work. The buyer really wants that work done, and the seller agrees that it should be done.

“The approach commonly applied is that each party might agree to accept 50% of the cost. But instead of doing the work or sending any money, what we would do is give a seller credit to the buyer for that $10,000, which would be applied at closing.”

In this scenario, the $10,000 credit is a financing concession that the buyer would apply towards their closing costs.

from HomeLight Blog https://www.homelight.com/blog/concession-real-estate/