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Seller concessions, explained

A seller concession is one of the most effective ways to cut the cash you bring to closing — but only if you know the limits and how to ask. Here's the full picture for buyers and sellers.

Last updated June 2026

When buyers and sellers talk about “the seller paying closing costs,” they mean a seller concession — also called a seller credit. It's a line in the purchase contract where the seller agrees to contribute a set amount (or percentage) toward the buyer's closing costs and prepaids. The money comes out of the seller's sale proceeds and lands on the buyer's side of the settlement statement, reducing the buyer's cash to close. It's one of the most common — and most misunderstood — tools in a home sale.

What a concession can and can't cover

A concession is restricted to closing costs and prepaid items:

  • Can cover: lender fees (origination, underwriting), title and settlement charges, the appraisal, recording fees, transfer tax where the buyer pays it, discount points, and prepaids like the first year of homeowners insurance and tax escrow.
  • Cannot cover: the down payment. Lenders draw a hard line here — a concession can pay your fees, but your equity stake has to be your own money (or a documented gift / assistance program).

If the concession exceeds the buyer's actual closing costs, the excess is generally lost — you can't pocket the difference. That's why a buyer should size the request to a real estimate. Run the closing cost calculator first so you ask for a number that matches your actual bill.

The contribution limits, by loan type

Loan programs cap how much a seller can contribute, to keep concessions from inflating prices. The caps are a percentage of the purchase price:

  • Conventional: 3% with under 10% down, 6% at 10%–25% down, 9% above 25% down. (Investment properties are capped at 2%.)
  • FHA: up to 6%, regardless of down payment — useful for low-down-payment buyers, as covered in our FHA vs. conventional guide.
  • VA: up to 4% of the price for “seller concessions” (which can include prepaying taxes/insurance and paying off buyer debts), plus the seller can separately pay all of the buyer's standard closing costs.
  • USDA: up to 6% of the price.

Within the cap, a concession is essentially free money toward your fees. Above it, the excess simply isn't allowed.

The appraisal trap

A popular move is to offer above asking and request a matching concession — say, offer $310,000 with a $10,000 credit on a $300,000 home. The seller nets the same $300,000, and the buyer finances $10,000 of their closing costs into the slightly larger loan. It works — if the home appraises at $310,000. If the appraisal comes in at $300,000, the lender will only lend against the lower value, and the deal has to be renegotiated. A straight concession at the agreed price carries no such risk, so weigh the appraisal odds before you inflate the price.

How to ask without weakening your offer

A concession isn't free to the seller — it lowers their net proceeds — so in a competitive market it can make your offer look weaker than a clean one. Tactics that help:

  • Read the market. In a buyer's or balanced market, concessions are routine and expected. In a hot seller's market, they can cost you the deal — consider a cleaner offer instead.
  • Be specific and reasonable. Ask for a dollar figure tied to your real closing costs, not a vague “cover my costs.” Sellers respond better to a precise, justifiable number.
  • Frame it as solving the seller's problem. If the home has been on the market a while or has a known repair issue, a concession is often easier for the seller to grant than a price cut, because it keeps the headline price intact.

The seller's side

For sellers, a concession is a direct reduction in net proceeds — it comes straight off what you walk away with. Before agreeing to one, model the impact: the seller net proceeds calculator lets you enter a concession amount and see exactly what you'll net after commission, transfer tax, and the credit. Often a $5,000 concession is an easier yes than a $5,000 price cut because it preserves your comparable sale price for the neighborhood — but the cash effect on you is identical, so go in with eyes open.

Putting it together

For buyers, a seller concession is a lever to lower the cash you need on closing day; for sellers, it's a negotiating tool that trades net proceeds for a deal that closes. The keys are staying inside your loan's contribution cap, sizing the request to your actual costs, and avoiding the appraisal trap. Start with real numbers: estimate your closing costs as a buyer, or your net proceeds as a seller, then negotiate from there. For more ways to lower the bill, see how to reduce your closing costs.

Frequently asked questions

What is a seller concession?

A seller concession (also called a seller credit or seller-paid closing costs) is money the seller agrees to put toward the buyer's closing costs, written into the purchase contract. It lowers the cash the buyer needs at closing without changing the loan amount or the down payment. The seller is effectively absorbing part of the buyer's fees out of the sale proceeds.

How much can a seller contribute to closing costs?

It depends on the loan. Conventional loans cap concessions at 3% of the price with under 10% down, 6% at 10%–25% down, and 9% above 25% down. FHA allows up to 6% regardless of down payment, VA allows up to 4% for certain costs, and USDA allows up to 6%. Concessions can only cover closing costs and prepaids — never the down payment.

Do seller concessions raise the price of the home?

They can. A buyer sometimes offers slightly above asking and asks for a matching concession so the seller nets the same while the buyer finances more of their costs. That only works if the home appraises at the higher price — if it doesn't, the deal has to be renegotiated. A straight concession at the agreed price has no appraisal risk.

Are seller concessions a good idea for buyers?

For a cash-tight buyer, yes — they trade a slightly higher loan balance (if you bump the price to fund them) or a slightly lower seller net (if you don't) for less money due at closing. The catch is that in a hot seller's market, asking for a concession can make your offer less competitive than a clean one. They shine in balanced and buyer's markets.

Keep reading

What are closing costs? A plain-English breakdown Who pays closing costs — the buyer or the seller? How to reduce your closing costs