Photo courtesy of Julan Hochgesang, Unsplash

What Buyers Should Know About Seller Concessions

If you’re in the market to buy a home (particularly if it’s your first), it’s important to know how to deal with the many upfront costs associated with purchasing a home. With everyone having easy access to mortgage calculators and property tax information, it can be easy to trick yourself into believing you know exactly how much money you’ll be spending. Unfortunately, closing costs often come as an unwelcome surprise to new buyers. 

What’s a Seller’s Concession?

That’s where seller concessions can come in. A seller’s concession is either a fixed amount or a percentage of a purchase price that a seller agrees to concede in order to ensure the potential buyer can cover those initial upfront costs so that the deal can go through. 

Despite the name though, it’s important to remember that sellers don’t have complete control over the amount of the concession. For instance, someone wanting to unload a property can’t just decide to take a 50% cut. Instead, seller concessions are capped at different levels for different loan products. Generally, this amount sits somewhere on the 2% to 9% spectrum. When deciding which mortgage broker to go with, be sure to communicate your interest in possible concessions down the line so that you can mutually choose the best loan option for you with that in mind. 

When To Ask for a Seller’s Concession

It’s important to take into account the current market and your personal situation when deciding whether to ask for seller concessions. For instance, in a seller’s market, it can be more difficult to get sellers to agree to concessions. Unfortunately, it’s also one of those areas where it can be risky to even ask. If there are multiple bids on a property, those that ask for seller concessions are going to be less appealing to the sellers. However, in a buyer’s market, this can very easily go the opposite way. Another scenario in which we see seller concessions potentially work in favor of the buyer are when a seller is in a time crunch. Perhaps they are also buying and can’t carry two mortgages and need to sell fast. 

If you’re buying new construction, it’s also a great time to find out if the developers are offering any seller’s concessions or other perks to get you to buy. They might even cover expenses like transfer taxes or attorney fees. 

In general, it’s always best to work with your team to determine the best course of action. Your mortgage broker can educate you on the concession limits for your loan product and your real estate agent can advise about whether it’s a good time to ask for concessions. Remember, the choice is ultimately up to you but it’s best to have a supportive and experienced team on your side. 

If you have questions about the buying process, please don’t hesitate to get in touch.

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