A seller credit, also called a concession, is money the seller agrees to contribute toward the buyer's closing costs, and it can meaningfully reduce what a Spokane buyer needs to bring to the closing table, within limits set by the buyer's loan type. These terms come up constantly in negotiations, but the details, what they can cover, how much is allowed, and how they differ from a price reduction, are often misunderstood. Here's what a seller credit or concession actually is and how it works.
What Is the Difference Between a Seller Credit and a Seller Concession?
The terms are often used interchangeably, but a seller credit sometimes refers specifically to compensation for a repair or issue found during inspection, while a concession typically refers to a broader contribution toward closing costs, prepaids, or a rate buydown. In practice, both get documented as a credit on the closing statement and reduce the buyer's cash needed at closing. The distinction matters most when it comes to loan limits, since inspection related repair credits aren't always capped the same way a general closing cost concession is.
What Can a Seller Credit Actually Pay For?
Seller credits can typically be applied toward loan origination fees, title charges, appraisal costs, prepaid property taxes and insurance, discount points, and in some cases a temporary rate buydown. What a credit cannot do, regardless of loan type, is cover the buyer's required down payment or minimum reserves. The credit also can't exceed the buyer's actual allowable closing costs, so any amount beyond what's actually owed doesn't get handed to the buyer as cash.
How Much Can a Seller Contribute? It Depends on the Loan Type
Seller concession limits are set by the buyer's loan type and are generally calculated against the lesser of the purchase price or the appraised value, not simply the agreed upon price.
- Conventional loans: Limits are tiered by down payment. Up to 3% with less than 10% down, up to 6% with 10 to 24.99% down, and up to 9% with 25% or more down. Investment properties are capped at 2% regardless of down payment.
- FHA loans: A flat 6% of the sale price, regardless of down payment amount.
- VA loans: Concessions for specific items, like prepaid taxes, the VA funding fee, or payoff of buyer debt, are capped at 4%. Standard closing costs and discount points are generally treated separately and aren't included in that 4% cap.
- USDA loans: Generally up to 6% of the purchase price, and like other loan types, the credit still can't exceed the buyer's actual closing costs.
Why Would a Seller Offer a Credit Instead of Lowering the Price?
A seller credit can accomplish something a price reduction can't: it helps the buyer at closing without lowering the recorded sale price, which can matter for neighborhood comparable values and future appraisals. For sellers, offering a credit instead of cutting the list price keeps nearby comparable sales stronger, which can matter to other sellers in the area, including the seller themselves if they're buying another home. For buyers, a credit reduces upfront cash needed rather than lowering the loan amount, which is a meaningfully different kind of help depending on what the buyer actually needs most.
Can Seller Credits Cause Problems With Financing?
Yes, if a credit is negotiated without checking it against the buyer's specific loan limits, it can create a last minute problem that requires restructuring the deal close to closing. If a seller agrees to a credit that exceeds what the buyer's loan program allows, or that exceeds the buyer's actual closing costs, the excess generally can't just flow to the buyer as cash, and the transaction may need to be adjusted. This is exactly why confirming the loan type and its specific limits early in negotiations, not after mutual acceptance, matters.
What Does This Mean for Buyers and Sellers?
For buyers, understanding your loan type's concession limit before writing an offer helps you negotiate with a realistic number in mind, rather than guessing. For sellers in the Spokane market, a credit can be a genuinely useful negotiating tool that protects your sale price while still making the deal work for the buyer. Emiley and Zech at Rios and Co Real Estate can help you understand what's realistic for your specific loan program and negotiate a credit structure that actually works at closing.
About the Authors
Emiley and Zech, Rios and Co Real Estate
Emiley and Zech are Spokane based real estate agents with Rios and Co Real Estate who guide buyers and sellers through negotiation details like seller credits and concessions, making sure what's agreed to in a contract actually holds up once the loan underwriting process begins.
This article is for general informational purposes and does not constitute financial or legal advice. Seller credit and concession limits vary by loan type, lender, and individual transaction. For guidance specific to your situation, consult your real estate agent or lender.
