What Is a Seller Concession and How Do I Request One in San Diego?

What Is a Seller Concession?

A seller concession is a contribution from the seller toward the buyer's closing costs — effectively reducing the amount of cash the buyer must bring to close. Instead of the buyer paying closing costs out of pocket, the seller agrees to credit a specified amount that escrow applies toward the buyer's fees at closing. Concessions are negotiated as part of the purchase offer or during post-inspection negotiations.

How Seller Concessions Are Structured

Concessions are typically stated as a dollar amount or a percentage of the purchase price in the purchase contract. A common structure: 'Seller to credit buyer $10,000 toward buyer's closing costs at close of escrow.' This amount appears on both settlement statements — as a debit to the seller and a credit to the buyer. It does not change the purchase price on paper but effectively reduces what the buyer pays out of pocket.

Lender Limits on Seller Concessions

• Conventional loans with less than 10 percent down: Maximum 3 percent of purchase price
• Conventional loans with 10 to 25 percent down: Maximum 6 percent of purchase price
• FHA loans: Maximum 6 percent of purchase price
• VA loans: Maximum 4 percent for concessions — plus the seller can pay all normal buyer closing costs
• Jumbo loans: Typically 2 to 3 percent — varies by lender

When to Request Seller Concessions

• When you have sufficient income and credit to qualify but limited cash for closing costs
• When you are asking for below-list price and want the seller to bridge the difference through concessions
• When the market is slower and sellers are more willing to negotiate terms
• When the seller stated they will not reduce the price but have flexibility on terms

Concessions in Competitive Markets

In San Diego's highly competitive market segments, requesting large seller concessions can make your offer less attractive — sellers prefer offers that net them the most money. In competitive situations, minimize concession requests or offer a higher price offset by a requested concession. Rieder Homes Group helps buyers structure offers that achieve their financial goals while remaining competitive.

Related Reading on RiederHomes.com:

→ Blog #86: Making an Offer

→ Blog #6: Buyer Closing Costs

→ Blog #88: Multiple Offer Strategy

→ Blog #89: Contingencies Explained

— Mance Rieder, Broker Associate | Rieder Homes Group | REAL Broker | riederhomes.com | 858-295-0556