Seller Concessions to Close the Transaction

Written By: Delores Weaver

Are your borrowers/buyers lacking funds to close the loan? Did you know that borrowers can receive “concessions” from the seller to help with the purchase of their home. FHA will allow up to 6% of the sales price while conventional lenders permit 3% for seller concessions. This is an essential part of closing your deal and makes the home sale flow smoothly to closing.

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What are seller concessions and which ones are more commonly used. According to Keller Williams, a California based realty company, a survey of their realty agents , the most common seller concessions are:

1. Paying for buyer’s closing costs
2. Reducing the original list price
3. Conducting repairs before closing
4. Purchasing a home warranty protection
5. Moving the close date
6. Purchasing appliances or furniture for a home
7. Providing a repair allowance
8. Providing buyer’s origination fees
9. Providing upgrade allowances
10. Paying buyer’s commitment fees

The reason why concessions are popular in todays market is due to the housing failure over the past few years. Many prospective buyers are facing the economic chaos stemming from the 2007 Real Estate Bust that severely impacted their credit scores as well as finances. In addition, the mortgage lending industry has tightened up their underwriting guidelines and FICO score levels were increased to make the bar almost impossible to reach. Needless to say, the task of finding qualified and quality homebuyers that can secure funding is next to impossible to find.
Even though the housing market and interest rates continue to remain low (in some areas), sellers have become more creative and aggressive in their approach to selling their homes. Most sellers realize that negotiating and agreeing to pay the buyer’s closing costs is better than reducing the price of the home. They understand that their assistance is greatly needed in order to close a transaction.

Most homebuyer are more concerned with the Seller paying the 3-5% closing costs such as origination fees, title insurance, escrow, down payment, document prep fees, etc.

While other homebuyers prefer seller concessions to pay for improvements to their home, such as remodel, upgrade appliances, furnishings, repairs, thereby adding value to their home

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Yet, other homebuyers take a totally different approach and request seller concessions to lower the monthly financing costs such as UFMIP (Upfront Mortgage Insurance Premium of 1.75%), annual MIP, reducing the price of the home, buying down the interest rate, or paying the first year of property taxes or hazard insurance.

If your homebuyers are falling short in providing the necessary funds to close the loan, be sure to advise them of the various options that could prove to be a win-win for both the seller and buyer.

About The Author

Delores Weaver - As an NAMP® staff writer, Delores Weaver is a mortgage instructor for Mortgage University® ( Delores has spent more than 25+ years at the forefront of mortgage lending in origination, training, support and development. Her technical expertise was complemented by a commitment to training, support and customer service. Drawing on her extensive experience in mortgage lending as an Executive VP of Marketing & Training, Originator, Processor and Underwriter, she specialized in designing and delivering training programs for users with little or no knowledge of mortgage lending. She became a regular speaker at various professional organization meetings and continues to support individuals and groups. If you're interested in becoming a writer for NAMP®, please email us at:

Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.