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What are Seller Concessions?
Whether you’re ready to purchase a new home or planning on putting your home on the market, you will need to know what seller concessions are and how they work. Seller concessions effect homebuyers and sellers in different ways.
In the home buying and selling process, a seller concession is a contribution given to the homebuyer by the seller to use towards their closing costs and prepaid items. Only when the seller agrees to pay these costs is it called a seller concession.
Why Would You Want to Ask for Seller Concessions?
Some borrowers may have money for their down payment but not enough savings to cover their closing costs and prepaid items. If the buyer can get the seller to agree to pay their closing costs, they won’t have to wait to buy a home until they can save their closing funds.
It’s important to keep in mind that if a seller pays these costs for the buyer, they are going to have to charge more for the house. It may sound unfair, but it is a good practice—sellers have to be able to cover that additional cost and still make the money off of the sale.
Should You Ask for Seller Concessions?
If you have money to pay for your closing costs, it’s a best practice not to ask for seller concessions until the seller mentions it. Asking for seller concessions can be a mistake if the home you want to purchase has multiple offers and not asking for seller concessions can strengthen your purchase offer. Sellers may opt to go with an offer that hasn’t requested funds from the seller.
If you do want to ask for a seller concession, have your agent write it into the contract. Also, recognize the value of the home if you do decide to ask. You don’t want to insult the seller by underestimating how much the home is worth.
There May be Restrictions on Seller Concessions
Remember that some loan programs do not allow seller concessions or have a limit on the amount of seller concessions. When choosing your Kansas City mortgage, ask your loan officer about your particular loan program guidelines and seller concession restrictions.