Negotiating Seller Concessions in Utah: How to Get the Seller to Help Pay Your Costs

What Are Seller Concessions

A seller concession is a credit from the seller to the buyer, applied at closing to cover the buyer's costs. The concession reduces what the seller nets from the sale, but the purchase price stays the same. It's a way for buyers to reduce their out-of-pocket costs without asking for a lower price.

Example: You and a seller agree on a $350,000 purchase price. You ask for a $6,000 seller concession to help with closing costs. The concession is documented in your purchase contract. At closing, the seller's net proceeds are reduced by $6,000 (they receive $344,000 instead of $350,000), and your closing costs are reduced by $6,000. The purchase price on the title remains $350,000.

Why Sellers Agree to Concessions

Market Conditions Matter

In buyer-friendly markets (where inventory is high and homes sit on market), sellers may agree to concessions to close deals. A concession request can tip the scale between two competing offers.

In seller-friendly markets (where inventory is low and homes sell quickly), sellers are less likely to agree to concessions because they have other offers without concession requests.

Motivated Sellers

Some sellers are motivated for personal reasons: job relocation, divorce, inheritance, or health issues. These sellers may be willing to make concessions to close quickly rather than wait for a "perfect" offer without concession requests.

Pricing Perception

Sellers sometimes prefer concessions over price reductions because the concession doesn't affect the recorded purchase price or future appraisals. If a home sold for $350,000 with a $6,000 concession, comparables still show $350,000 sales price, which protects the value perception of the neighborhood.

How Concessions Work Mechanically

In the REPC

In Utah's standard real estate contract (the REPC), seller concessions are listed as a dollar amount or percentage in the financing section. You might write "Seller concession: $7,000" or "Seller concession: 2% of purchase price." This amount is binding once both parties sign.

At Closing

Your closing disclosure (the final document showing all costs) will itemize your closing costs. The seller concession is applied as a credit to the buyer. Let's say your closing costs total $11,000 and you have a $7,000 seller concession. Your out-of-pocket payment at closing is $4,000 instead of $11,000.

Lender Approval

Your lender must approve the concession amount. Lenders have rules about how much concession is allowed based on your loan type and down payment. Your lender won't fund a concession that exceeds their limits, even if you and the seller agreed to it. We'll cover those limits below.

The Concession Can't Exceed Actual Costs

A concession can't exceed your actual closing costs. If your closing costs are $10,000, you can't get a $12,000 concession. The lender will reduce it to $10,000. This protects against fraud and ensures concessions are used for their intended purpose.

Loan Type Concession Limits

Different loan programs allow different maximum concession amounts. These limits are strict, and asking for more doesn't help; the lender will simply reduce it to the limit.

FHA Loans

FHA allows seller concessions up to 6% of the purchase price. On a $300,000 home, that's $18,000. This is the most generous limit among loan types. FHA is designed to help buyers, so they permit higher concessions.

VA Loans

VA allows seller concessions up to 4% of the purchase price. On a $300,000 home, that's $12,000. The concession can cover all buyer closing costs and prepaid items (like property taxes and insurance escrow).

USDA Loans

USDA has no official percentage limit, but concessions generally cannot exceed the actual closing costs and prepaid items. In practice, most USDA lenders allow concessions similar to conventional limits.

Conventional Loans

Conventional limits depend on your loan-to-value ratio (LTV), which is your loan amount divided by the purchase price:

• LTV over 90% (less than 10% down): 3% maximum concession
• LTV 75-90% (10-25% down): 6% maximum concession
• LTV under 75% (25%+ down): 9% maximum concession

Example: You're buying a $400,000 home with 5% down ($20,000), so your LTV is 95%. Your maximum concession is 3%, or $12,000. If the seller agreed to $15,000, the lender will reduce it to $12,000.

Strategic Use of Concessions

When Concessions Make Sense

Concessions work best in these situations:

• You're cash-short but income-qualified: Your income qualifies you for the loan, but you lack closing cost cash. A concession solves this without you asking for a lower price.
• The market favors buyers: Homes are taking time to sell, inventory is high. A concession request can make your offer more attractive than others.
• The home has minor issues: The appraisal might come in lower or the inspection finds small repairs. A concession compensates without renegotiating price.
• You have a competitive price offer: If your price is already strong, a small concession request (under 3%) can clinch the deal.

Concession vs. Price Reduction Example

Let's say you're buying a home listed at $350,000. You have two options:

Option A: Lower your offer price to $343,000 (saving $7,000) This reduces the purchase price, affects appraisals and comps, and lowers your equity starting point.

Option B: Offer $350,000 with a $7,000 seller concession The purchase price stays $350,000 (better for your equity and future appraisals), and you save $7,000 in cash at closing.

Most lenders prefer Option B because it keeps the purchase price higher. Sellers sometimes prefer it too because it doesn't reduce the recorded sales price.

When NOT to Use Concessions Aggressively

In Multiple-Offer Situations

If a home is in high demand and the seller has multiple offers, a large concession request weakens your offer. Sellers prefer fewer conditions and contingencies. A big concession request alongside a lower price offer might cause the seller to choose another offer.

In multiple-offer situations, it's often better to offer full price with no concession request than a lower price with a concession.

When You Have Adequate Savings

If you have substantial savings after your down payment, asking for a concession can make you look cash-strapped or financially weak. Sellers prefer buyers who look financially stable.

In Tight Appraisal Situations

If the home is borderline appraising for the purchase price, asking for a concession can sometimes complicate underwriting. The lender may view it as sign the deal is stretched. In these cases, keep the offer clean and simple.

Examples by Price Point

Tips for Negotiating Concessions

Know Your Limits Before You Offer

Work with your lender before submitting your offer. Ask: "Based on my loan type and down payment, what's the maximum concession the lender will allow?" Knowing this number before negotiating prevents you from wasting effort asking for more than you'll receive.

Request Concession in the Initial Offer

Include the concession in your original offer, not as a counter-request. It's stronger to say "I'll offer $350,000 with a $6,000 seller concession" than to ask for a price reduction and then later add a concession request. The latter makes you look uncertain.

Keep Concession Requests Reasonable

Asking for the absolute maximum allowed can offend sellers and signal desperation. If your loan allows 3% but you ask for 2.5%, it reads as reasonable and flexible. You leave room for negotiation if the seller counters.

Pair Concession Request with Strong Offer Elsewhere

If you're asking for a concession, compensate by being strong elsewhere: offer a short closing timeline, include a pre-approval letter, include proof of funds, or waive contingencies where safe. This signals financial stability even though you're asking for a concession.

Use Concessions for Appraisal Shortfalls

If the appraisal comes in lower than the purchase price, a concession request is appropriate and sellers often accept it. Saying "The appraisal came in at $340,000 instead of $350,000. Can you concede $5,000 to bridge the gap?" is usually reasonable and sellers often agree.

Remember: It's a Negotiation

You might ask for 3% and the seller counter-offers 1.5%. That's okay. Concession negotiations are normal. Your agent can guide you on what's reasonable to ask for given market conditions and the specific property.