What Are Seller Concessions?

What are seller concessions when you sell a home in Farmington or Kaysville, Utah? They are money the seller agrees to pay toward the buyer's costs at closing, and they come straight off what the seller walks away with, which is why, after more than 1,300 homes sold, I read them on every offer and every comparable sale.

A concession does not change the sale price written on the contract. It comes out of the seller's side of the settlement statement, so it lowers what the seller actually walks away with. The money usually goes toward the buyer's closing costs: title fees and title insurance, the appraisal, the lender's loan costs, prepaid property taxes and insurance, and sometimes a rate buydown so the buyer's monthly payment comes down. In Utah it gets written into the state's Real Estate Purchase Contract (REPC) as seller-paid closing costs.

I am David Supinger, Principal Broker of Home Click Real Estate. I live in Farmington and most of the homes I sell are in Farmington and Kaysville, so the examples here come from this part of Davis County. The rules themselves work the same way anywhere in Utah.

Here is the one that made me want to write this. This summer I was putting together a pricing update for a seller, and one of the comparable sales on the list had been on the market 88 days and then sold for full price. On paper that looks like a strong sale. Then you look underneath it and they gave back $40,000 in concessions, so they really didn't get full price.

Most people never see the concession. The sold price is the number everybody repeats, the number on the postcard and the number your neighbor tells you over the fence. The concession sits underneath it, and you have to go looking for it.

It matters to you two ways. If you are selling, the number that pays off your mortgage and funds your next home is the net, not the price. And if a neighbor's "full price" sale is the reason you think your home is worth a certain number, that number may already be $40,000 too high before we start.

When I pull comparable sales for a Farmington or Kaysville seller, I read the concessions on every one of them for exactly that reason. A price with $40,000 coming back out of it is a different sale than the same price with nothing coming back.

Because of how the loan works. Lenders do not let a buyer simply walk away from closing with cash in hand. The way I explain it to buyers, a lender does not want somebody putting 3% down and getting 5% back in repairs, because then the buyer is getting paid to buy the house.

The money gets routed through the buyer's closing costs instead: the lender's fees, the appraisal, title, an interest rate buydown, anything the buyer would otherwise pay out of pocket. The buyer's own cash stays in their checking account because it didn't have to go into closing, and after closing they have it for whatever they want to fix.

This comes up most often after the inspection. A seller whose home is vacant, or who is very busy, often would rather give a dollar amount toward the repairs than call three contractors, meet them at the property, collect the bids and then follow up to make sure the work got done properly. A concession does the same job without any of that.

For a buyer, a concession can be worth more than the same dollars taken off the price, because it reduces the cash they need to close today. For a seller, the two cost close to the same. That is why it is worth looking at the net on every offer rather than the headline number.

1. It gets written into the offer. The buyer's agent puts a dollar amount of seller-paid closing costs on the state purchase contract. Sometimes it is there from the first offer, and sometimes it arrives later.

2. The seller accepts, counters or declines it. A concession is a term like any other. It can be traded against price, timing or possession, and it should be weighed on what it does to your net.

3. The inspection can bring it back up. After the buyer's inspection, a list of repairs often turns into a request for money toward those repairs instead. If you are selling a vacant home, or you simply don't want to manage contractors, this is usually the cleaner answer for you as well.

4. The buyer's lender checks it against the loan's limit. Every loan type caps what a seller can pay on the buyer's behalf. More on those limits below.

5. At closing it shows up on the settlement statement. The title company lists it as a credit to the buyer and a charge to the seller. Your proceeds are your price, less your loan payoff, less your own costs of sale, less the concession.

6. Anything the buyer can't use goes back to the price. On the state form, unused seller-paid closing costs reduce the purchase price. That sentence matters more than people think, and the story below is why.

The buyer's loan sets the ceiling, not the seller and not the agent.

For a conventional loan sold to Fannie Mae, the limit on what a seller or other interested party can contribute depends on how much the buyer is putting down, measured against the lower of the sale price or the appraised value. On a primary residence or second home: 3% when the loan is more than 90% of the value, 6% when it is between 75.01% and 90%, and 9% when it is 75% or less. On an investment property it is 2%.

Anything over the limit is treated as a sales concession, which gets deducted from the sale price before the loan is calculated. The money also cannot go toward the buyer's down payment or the reserves the lender requires.

Loans from the Federal Housing Administration (FHA), VA loans and jumbo loans each have their own rules, and jumbo limits vary from lender to lender. Homes over $1M are often bought with jumbo financing, so the real number for any one buyer comes from that buyer's lender. I would rather we get it in writing from the lender before an offer is accepted than find out at closing.

Conventional limits are from the Fannie Mae Selling Guide, section B3-4.1-02, Interested Party Contributions, read 23 October 2026.

This is where the paperwork matters. The state form for seller-paid closing costs says that any unused funds go toward reducing the purchase price. That one sentence protects both sides.

Some buyer's agents write their own version of the addendum and leave that sentence out. It happened on one of my listings. The buyer's lender capped how much of the concession the buyer could use. They already had a rate buydown, they put what they could toward prepaid interest, prepaid taxes, a home warranty and an extended home warranty, and then they were tapped out. My seller kept roughly $1,000 the buyer couldn't use, purely because the state form wasn't used.

I only write concessions on the state form. Written correctly, the money goes where the client wants it to go.

Comparing offers on price instead of net. This is the big one. Two offers on a Farmington home can look $15,000 apart on price and land within a few hundred dollars of each other once the concessions come out.

Pricing off a neighbor's sold price without reading the concessions. The $40,000 example above is real. If your list price is built on a sale that netted far less than its headline, you start the listing too high, and a home that starts too high is the home that sits.

Agreeing to more than the buyer's loan allows. If the concession goes over the loan's limit, the excess comes off the price for the lender's math, and that can unravel the buyer's financing late in the deal. Get the lender's number before you agree.

Accepting a home-made addendum. The state form has the sentence that sends unused money back to the price. A version a buyer's agent wrote themselves may not.

Treating every repair request as a concession. Sometimes doing the repair yourself costs less than the credit being asked for. It depends on the repair, and it is worth one phone call to a contractor before you decide.

Here is a worked example with round numbers so the arithmetic is easy to follow. It is an illustration, not a client's sale.

Say a Kaysville home gets two offers. Offer A is $1,200,000 with $24,000 in seller-paid closing costs. Offer B is $1,185,000 with nothing back. Offer A is $15,000 higher on paper, and $9,000 lower in the seller's pocket before anything else is counted, because $24,000 comes back out of it.

Now say the buyer on Offer A is putting 20% down on a conventional loan. Their limit is 6% of the lower of price or appraised value, so the $24,000 fits comfortably. If that same buyer were putting 5% down, the limit drops to 3%, which is $36,000 on $1,200,000. Still fine. If the request were $50,000, it would not be, and the extra would have to come off the price for the loan to work.

I have that conversation with a seller on every offer: what you keep, what the buyer's loan allows, and which offer is most likely to close.

Do seller concessions lower the sale price? Do seller concessions lower the sale price on a Farmington or Kaysville home? Not on the contract or the public sold price. They lower your net, which is why a sale can be recorded at full price while the seller took less.

Are seller concessions the same as a price reduction? Are seller concessions the same as reducing the price? For the seller they cost close to the same. For the buyer they are different, because a concession reduces the cash the buyer needs at closing and a price reduction lowers the loan.

Can concessions pay for repairs? Can a seller concession pay for repairs found at the inspection? Not directly to the buyer as cash. The money goes toward the buyer's closing costs, which leaves the buyer's own cash free for the repairs after closing.

Who decides how much a seller can pay? Who decides the most a seller can pay in concessions? The buyer's loan. Fannie Mae's limits for a conventional loan run from 2% to 9% depending on the down payment and the type of property, and other loan types have their own rules.

Do concessions affect what my home is worth? Do concessions on nearby sales affect what my home is worth? They should affect how those sales are read. A comparable that sold at full price with $40,000 back is a $40,000 lower sale in every way that matters to you.

David Supinger is the Principal Broker of Home Click Real Estate in Salt Lake City, Utah, with 34 years full time in the business, who has personally sold more than 1,300 homes across Davis and Salt Lake counties. He lives in Farmington and has 171 Farmington sales on record.

A home valuation built on what comparable homes actually netted, not just what they sold for, gives you a number you can defend. Selling your home covers how the rest of the sale runs, and the selling process walks through each step in order.

If you are selling in Farmington or Kaysville and an offer with a concession is in front of you, or you want to know what your home would actually net, send me a note and I will run the numbers with you.