A seller concession is the seller agreeing to credit a portion of the purchase price toward your closing costs. Instead of a $400K home with $12K in closing costs out of your pocket, you negotiate $400K with a $12K concession — seller nets the same but your cash-to-close drops by $12K. Every loan program has caps.
Worked example: FHA purchase at $385,000. FHA cap is 6% of purchase price = $23,100 max concession. You only need $11,500 to cover closing costs — seller agrees to $11,500 concession. Cash to close drops from $24,975 (3.5% down + $11.5K closing) to $13,475 (just the down payment).
Concession caps by loan type
- Conventional primary, down less than 10%: 3% max
- Conventional primary, 10-25% down: 6% max
- Conventional primary, 25%+ down: 9% max
- Conventional investment: 2% max
- FHA: 6% max (all scenarios)
- VA: 4% max, plus unlimited payment of customary closing costs (complicated — read the VA Pamphlet 26-7)
- USDA: 6% max
- Jumbo: varies by lender, often 3%
Price cut vs concession — which wins?
Concession almost always wins for the buyer when cash is tight. A $10K concession preserves $10K in your pocket at closing. A $10K price reduction saves you about $65/month over 30 years at 7% rate — nice, but you give up the $10K cash today. If liquidity is the constraint (first-time buyers especially), take the concession.
Exception: if you're paying over appraised value and using the concession inflates the loan-to-value, a price cut can keep you under LTV thresholds for PMI or rate tiers.
How to negotiate concessions
- Build the concession into the offer price (offer $410K with $10K concession instead of $400K flat)
- Comes up organically in inspection negotiations (repairs → equivalent credit)
- Stronger in buyer's markets and on longer-days-on-market listings
- Weaker on multiple-offer situations where sellers reject concession asks