Seller Concession - A seller concession helps a borrower to pay some or all of their closing costs. The realtor write a seller concession into the purchase agreement usually before placing a bid on a property. Anywhere from 3%-6% (this is a percentage of the purchase price) is a typical seller concession. This is helpful for borrowers who do not have the necessary amount of money to pay for closing costs and for borrowers who would rather hold onto their money instead of tying it up into their mortgage.
Example of how a seller concession works:
House for sale, asking price 100,000, you place a bid for 98,000 and request the seller pays 3% of your settlement charges. Seller concession amount is equal to $2,940 to be used to pay for your closing costs.

If you do not qualify for a seller assist, the seller will not agree to one, or it does not cover enough of the closing costs you may want to consider a 103% mortgage program. This type of loan finances an additional 3% fo the purchase price to help pay for the closing costs.

By structuring a sales contract to include a sellers concession to assist with closing costs, you can keep more of your savings as a cushion or to help pay for any necessary repairs on your new home.

Make sure the real estate agent you are working with knows to write your offer to purchase with seller concessions. It may cause problems and delay the purchase of your new home if the realtor has to ask for an amendment to the original offer to purchase.

Most lenders will not allow you to use the seller concession to profit from a purchase. You can use the money to payoff costs but not get cash in hand at the end of escrow.

If you have little or no cash to purchase your home, seller concessions are a great way to get into a home with little or no money out of pocket. Be sure to speak to both your realtor AND mortgage professional before signing the P&S to ensure it is worded properly.

The market is turning from a seller's market to a buyer's market. Therefore to keep housing prices stable, sellers may be more willing to offer concessions. Depending upon the lender, seller concessions may only be limited to non recurring costs, such as title insurance, appraisal costs, points paid, interest rate buydown, broker fees, etc. This means then that recurring costs could be covered by the seller - 6 months PITI, homeowners insurance, etc.

One unique seller concession is for the sellers to pay points for the buyers to lower their interest rate. What a great incentive for a seller to offer to lower the buyer's mortgage rate by 0.500, 0.750, or 1.000 %!

Seller Concession - Seller Concessions are seller paid closing costs that are rolled into your mortgage loan.

Seller Concessions are typically used in 100% purchase transactions where the buyer is not putting any money down.
This helps the buyer pay for the closing costs associated with the loan process.

Typically on 100% purchase transactions you are limited to a seller concession of 3% of the purchase price if you are obtaining financing from a conforming lender. This may or may not be enough to pay for all of the closing costs involved, depending on where it is that you are buying your home.
There are also many so-called "Non Conforming" or "Subprime" Lenders that will allow a seller concession up to 6% of the purchase price even on 100% purchase transactions.

Seller Concessions cannot be used towards the downpayment.

A seller concession must be clearly stated in your purchase contract and the contradcted sales price which includes the seller concession cannot exceed the listing price.

A seller concession is offered by the seller as an inducement to a prospective buyer to aid in the sale of a home.

Ask your lender about new Fannie Mae and Community loan programs which may allow 6% seller's concessions on loans with as little as 3% downpayment.

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