Nearly Half of Home Sales Now Come With This Perk - Here’s What It Could Save You

You don't need us to tell you that buying a home has gotten painfully expensive. Between mortgage rates that make monthly payments harder to swallow and upfront costs that add thousands to an already daunting purchase, buying a house isn't anyone's idea of fun.

Yet buyers may have more room to negotiate than they realize.

Nearly half of U.S. home sales now come with a seller concession. While sellers aren't necessarily knocking money off the asking price, in many cases, they are offering to pay costs that would otherwise come out of the buyers' pockets.

Want to lower your financial stress before you buy a new home? Here's how you could make your purchase more affordable.

Seller concessions are becoming more common

Seller concessions appeared in 44.7% of U.S. home sales in August, according to a Redfin analysis. That's up from 42.6% a year earlier and the highest August share since 2020.

A likely reason is weak demand in a market with plenty of homes for sale. Redfin found that sellers outnumbered buyers by nearly 58% nationally in August, the largest gap in its records.

Understandably, sellers have more reason to sweeten the deal, and they're getting creative. A seller concession is something a seller agrees to pay or provide to lower a buyer's cost of purchasing the home.

Redfin's analysis includes money toward closing costs, repairs, and mortgage-rate buydowns as seller concessions. It doesn't count an ordinary reduction in the home's sale price, which matters because a $10,000 concession and a $10,000 price reduction don't help a buyer in the same way.

A concession may cut the cash you need at closing

Unlike a price reduction, a concession may apply to closing costs. Buying a home involves more than a down payment, including lender fees, title and settlement costs, appraisal fees, and prepaid property taxes and insurance. Freddie Mac estimates that closing costs typically run about 2% to 5% of the purchase price.

On a $400,000 home, that's potentially $8,000 to $20,000.

If the seller agrees to contribute $10,000 toward eligible closing costs, a buyer with enough income to afford the mortgage but struggling to come up with the cash needed to close has fewer costs to contend with.

Still, there are limits. Mortgage programs and lenders use rules to decide how much sellers may contribute and what they may cover. For example, Fannie Mae doesn't allow seller contributions for a buyer's down payment or required financial reserves.

To stay within the law, have your lender confirm exactly how a proposed concession could be used before negotiating with the seller.

The perk may also reduce your monthly mortgage payment

Seller concessions also include a mortgage-rate buydown, which could lower the buyer's interest rate and monthly payments. It's especially valuable when mortgage rates are high.

For example, a seller might contribute money toward a temporary rate buydown that allows the buyer to pay a lower interest rate during the first few years of the mortgage.

Sellers may also negotiate repair concessions. Instead of fixing an aging roof or replacing a malfunctioning appliance, a seller might offer the buyer a credit toward eligible costs.

This gives you another option: Either negotiate for the seller to address the problem or receive compensation that covers it.

A concession isn't the same as a lower price

We've mentioned this before, but it bears explaining in detail.

If a home is listed for $500,000, the seller could agree to reduce the price to $490,000 or sell it for $500,000 while providing $10,000 toward eligible buyer costs.

While those deals may seem identical, they're not. A concession preserves the home's headline sale price while making the deal more attractive and directly offsetting the buyer's expenses. A price reduction lowers the purchase price, but it may not dramatically change the buyer's cash requirement at closing.

The CFPB notes that seller credits toward closing costs can reduce what buyers pay out of pocket, although buyers should understand that costs financed through the mortgage may still be paid indirectly over time.

Interestingly, Redfin found that 15% of U.S. homes that sold in August had both a concession and a price reduction.

Buyers should negotiate beyond the asking price

Even in a buyer's market, not every seller is desperate to make a deal. Some homes are too desirable to compromise on, and some sellers refuse to make concessions.

Still, there's no harm in asking. If a seller won't budge on the asking price, you could negotiate for help with closing costs. If the home needs work, you could ask for repair credit. Likewise, if the mortgage payment is your biggest concern, discuss a rate buydown.

Whatever you do, don't assume the asking price is the only number that matters.

Bottom line

Nearly half of U.S. home sales now include a seller concession, giving buyers another way to make an expensive purchase more manageable. Concessions help reduce the cash needed at closing, cover eligible repairs, or potentially lower mortgage payments through a rate buydown.

To keep more of your money when you're shopping for a home, don't stop at negotiating the price. Ask your lender and real estate agent which concessions would have the biggest financial impact for you, then request those terms in your offer. In a market where sellers significantly outnumber buyers, the asking price may be only the beginning of the negotiation.

This article is for informational purposes only and should not be considered investment advice.

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