Welcome Back to the Seller Concession Playbook

Seller concessions are one of the most powerful tools available to buyers in the current market. They are also one of the most misunderstood. Jennifer Chicano, Your Loan Chic, is back with another episode of the Seller Concession Playbook to address a specific and critical limitation that buyers need to understand before they sit down at the negotiating table.

What Seller Concessions Can Actually Be Used For

Seller concessions are funds the seller contributes toward allowable costs associated with the transaction. That list includes closing costs such as lender fees, title fees, and recording charges. It includes prepaids like homeowners insurance, prepaid interest, and escrow deposits. And it includes interest rate buydowns that reduce the monthly payment either temporarily through a buydown structure or permanently through discount points.

All of those applications are legitimate and valuable uses of seller concession dollars. In the current market where sellers are motivated to make deals work these contributions can meaningfully reduce the cash a buyer needs to bring to closing and improve the monthly payment picture from day one.

What Seller Concessions Generally Cannot Do

Here is the distinction that matters and that too many buyers miss until it creates a problem. Seller concessions are generally not a substitute for the required down payment. The down payment must come from an eligible source that is separate from seller concessions.

The specific eligible sources for down payment funds vary by loan program and lender guidelines but the consistent principle across most programs is that the seller's contribution cannot simply replace the buyer's required investment in the transaction. If a loan program requires three and a half percent down that money needs to come from the buyer's own funds, gift funds from an eligible donor, or an approved down payment assistance program depending on what the specific loan allows.

Why This Matters Before the Offer Is Written

A buyer who negotiates a large seller concession under the assumption that it will cover their down payment is going to encounter a significant problem when the financing structure is examined. That concession cannot be redirected to satisfy the down payment requirement. It can only go toward the allowable costs it was designed to address.

That misunderstanding does not just create paperwork issues. It can derail an offer or a closing at the worst possible moment.

Jennifer's approach prevents this entirely. Determine the financing structure first and then build the concession strategy around what those funds can actually accomplish within that structure. Know what the down payment requires, where those funds are coming from, and what remains for the concession conversation before the negotiation begins.

Do not just negotiate the price. Have a plan for the money.

Follow along for the next episode of the Seller Concession Playbook and reach out to Jennifer Chicano, Your Loan Chic, to build the right strategy for your specific purchase.

Sources

ConsumerFinancialProtectionBureau.gov
FannieMae.com
HUD.gov
MortgageNewsDaily.com
Investopedia.com