Concessions and how they impact a sellers bottom line.

When you are buying or selling a home, in the negotiation process, one side or the other may offer what is referred to as a concession. This is a benefit or agreed upon dollar amount offered by one side to the other.

This concept is also called an allowance, such as a carpeting allowance. This is sometimes a marketing tool used by a listing agent when we know there could be some concern with the age of an appliance or an outdated look. An example may be “Seller is offering a $1500 paint allowance with an acceptable offer”. It may not always be feasible for a seller to make changes to a home. In our market this happens when sellers are having to move quickly due to a military relocation. There’s not time or money to handle the repair up front, but they realize its a concern and want to inform potential buyers that we are willing to concede some money to entice them to make an offer. Its a true win-win for everyone. 

Another approach to concessions is a buyer requesting closing cost assistance. I am a big believer in not using this as part of an offer, but sadly it is very common, so much so that it has almost become an expectation. Remember that a request for closing cost assistance impacts the sellers bottom line. A $200,000 offer with $5000 in closing cost assistance looks mysteriously a lot like a $295,000 offer (actually less because the commissions and other fees are based on a percentage….higher sales price means the seller is paying even more). 

When I represent a buyer I try to convince them that the best approach is to avoid asking for closing cost. I think it’s important to have funds for your own down payment and closing cost when possible. It helps give you more equity up front and shows that you are financially ready to be a home owner. When I represent a buyer and there are 2 offers on the table, we always look at the closing cost request and it will almost always impact the sellers decision. 

One thing to remember is that concessions are typically paid at closing. Imagine a brief case of money sliding across the table from the buyer to the seller for the full amount of the home. The seller reaches in the brief case, pulls out the amount of the concessions and slides it back across the table to the buyer. While the concession will impact the bottom line for the seller, it only comes out of the final amount.

There is a deeper dive on my YouTube channel. Look for the video on “Three C’s” I go into a bit more detail. You can also contact me directly if you want more info or have questions. Welcome Home!

Chris Whitehurst

Inner Banks Real Estate 

252 312 2263