Understanding Seller Concessions in North Carolina: What You Should Offer

You just got an offer on your Newton home and the buyer is asking for $8,000 in seller concessions. Your agent says it's normal. But is it? Should you agree? What does it even mean?

Seller concessions are one of the most misunderstood parts of home sales. Let me break down exactly what they are, what's reasonable in the Catawba County market, and how they affect your bottom line.

What Are Seller Concessions?

Seller concessions (also called "seller contributions" or "seller assist") are closing costs that you, the seller, agree to pay on behalf of the buyer.

Common Concessions Include:

• Loan origination fees
• Appraisal fees
• Title insurance (buyer's policy)
• Home inspection fees
• HOA transfer fees
• Prepaid taxes and insurance
• Loan discount points

What They're NOT:

• Repairs to the property
• Price reductions
• Commission negotiations

Concessions are literally you writing a check (at closing) to cover costs the buyer would normally pay.

Why Do Buyers Ask for Concessions?

Buyers request concessions because they don't have cash for closing costs on top of their down payment.

Example:

Buyer purchasing $220,000 Newton home:

• Down payment (5%): $11,000
• Closing costs: $6,000-$8,000
• Total cash needed: $17,000-$19,000

Many buyers have the $11,000 down payment but not the extra $6,000-$8,000. They ask the seller to pay closing costs so they can buy the home.

How Concessions Actually Work

The mechanics matter for understanding the impact:

Scenario Without Concessions:

• Sale price: $220,000
• Buyer pays own closing costs: $7,000
• You net (after commission/costs): $195,000

Scenario With $7,000 Concessions:

• Sale price: $220,000
• Seller pays buyer's closing costs: $7,000
• You net (after commission/costs): $188,000

You pay: Your selling costs PLUS buyer's closing costs.

That $7,000 concession comes directly out of your pocket.

Maximum Concession Limits by Loan Type

NC lenders limit concessions based on loan type:

Conventional Loans:

• 3% for down payments under 10%
• 6% for down payments 10-25%
• 9% for down payments over 25%

FHA Loans:

• Maximum 6% of sale price

VA Loans:

• Maximum 4% of sale price
• Plus additional specific fees

USDA Loans:

• Maximum 6% of sale price

Cash Buyers:

• No concessions (they're not getting a loan)

Example:

$220,000 home with FHA buyer:

• Maximum concession: $13,200 (6%)
• Typical request: $5,000-$8,000
• Reasonable amount: $6,000 or less

What's Normal in Newton/Catawba County

In our local market, typical concession requests:

Lower Price Range ($120,000-$180,000):

• Typical request: $5,000-$8,000
• Often from FHA/VA buyers
• Very common in this segment

Mid Price Range ($180,000-$250,000):

• Typical request: $4,000-$7,000
• Mix of loan types
• About 40-50% of sales include concessions

Higher Price Range ($250,000+):

• Typical request: $3,000-$5,000
• Or no concessions requested
• More likely to have cash or strong down payments

When to Offer Concessions

Concessions can be a strategic tool:

Offer Concessions To:

1. Attract More Buyers

   • Advertise "$5,000 toward closing costs"
   • Appeals to buyers with limited cash
   • Increases your buyer pool

2. Close Deals Faster

   • Buyer doesn't need to save more cash
   • Can close sooner
   • Removes financing obstacle

3. Compete in Slow Market

   • When inventory is high
   • Your home needs edge
   • Helps your listing stand out

4. Avoid Price Reduction

   • Instead of reducing price $10,000
   • Offer $5,000 concessions
   • Psychological difference for buyers

When to Refuse Concessions

Sometimes saying no makes sense:

Don't Offer Concessions If:

1. Strong Seller's Market

   • Multiple offers
   • High demand
   • Buyers have cash

2. Cash Buyer

   • They're not getting a loan
   • No closing costs to pay
   • Concessions don't apply

3. Already Priced Low

   • Home is priced aggressively
   • Minimal profit margin
   • Can't afford to give more

4. Buyer Has Strong Down Payment

   • Putting 20%+ down
   • Can afford closing costs
   • Concession request is opportunistic

Negotiating Concessions

When buyers request concessions, you have options:

Strategy 1: Counter with Less

• Buyer asks $8,000
• You offer $5,000
• Meet in middle at $6,500

Strategy 2: Tie to Other Terms

• "I'll give $6,000 if you drop inspection contingency"
• "I'll pay $5,000 if you close in 30 days"
• Use concessions as negotiation leverage

Strategy 3: Adjust the Price

• Instead of $220,000 with $7,000 concessions
• Offer $215,000 with $2,000 concessions
• May net you more after commission

Strategy 4: Agree to Needed Amount Only

• Ask buyer to provide actual closing cost estimate
• Pay only what they actually need
• Avoid overpaying

The Math on Concessions

Here's what many sellers miss: concessions affect your commission too.

Example:

$220,000 sale with $7,000 concessions:

• Commission (6%): $13,200
• Your concession: $7,000
• Total cost: $20,200

Alternative: $215,000 sale with $2,000 concessions:

• Commission (6%): $12,900
• Your concession: $2,000
• Total cost: $14,900
• You save: $5,300

Sometimes a lower price with fewer concessions nets you more money.

Concessions vs. Repairs

Don't confuse concessions with repair requests:

Repairs:

• Fix specific issues found in inspection
• Physically fix the problem OR
• Credit buyer to fix after closing

Concessions:

• Pay buyer's normal closing costs
• Not related to property condition
• Help buyer afford the purchase

You might face both: repair requests AND concession requests. They're separate negotiations.

How Concessions Affect Appraisal

Important detail: concessions don't reduce appraised value.

How It Works:

Sale price: $220,000 with $7,000 concessions

• Home must appraise for $220,000
• Concessions are paid after appraisal
• Lender bases loan on $220,000

This is why sellers sometimes prefer concessions over price reductions - the sale price stays higher even though you're paying more.

Advertising Concessions

If you're offering concessions upfront to attract buyers:

In Your Listing:

• "$5,000 Toward Closing Costs"
• "Seller to Pay $6,000 Buyer Costs"
• "Up to 3% in Seller Concessions"

Benefits:

• Attracts FHA/VA buyers
• Makes your listing stand out
• Signals you're motivated
• Helps buyers calculate affordability

Risks:

• May attract only broke buyers
• Could signal desperation
• Might get lowball offers

Use strategically based on your market position.

Concessions and Cash Buyers

Cash buyers don't need concessions because they're not getting a loan. If a cash buyer requests "concessions," they're really asking for:

• Price reduction
• Credits for repairs
• Moving costs
• Something else

Call it what it is - a price negotiation, not concessions.

Tax Implications

For sellers, concessions are not tax deductible. They're simply part of your selling costs that reduce your net proceeds.

For buyers, concessions can affect what they pay in the long run but that's their issue, not yours.

When Concessions Make Sense

Good Reasons to Offer Concessions:

1. Market is slow and you need buyer attention
2. Buyer is qualified but short on cash
3. You want to close faster
4. It keeps deal together
5. Alternative is losing the sale

Bad Reasons to Offer Concessions:

1. Buyer didn't save properly
2. Buyer is overextended
3. You're taking a loss
4. Better offers available
5. Buyer is unreasonable

The Catawba County Reality

In Newton, Hickory, and surrounding areas:

Market Norms:

• 40-50% of sales include some concessions
• Typical amount: $3,000-$7,000
• FHA/VA buyers almost always request them
• Conventional buyers often don't need them
• Higher-end homes rarely include them

If you're selling in the $180,000-$240,000 range, expect concession requests and plan accordingly.

Net Proceeds Calculator

Always calculate your actual net:

Scenario A: $220,000 - $7,000 Concessions

• Sale price: $220,000
• Commission (6%): -$13,200
• Title/closing: -$2,500
• Concessions: -$7,000
• Mortgage payoff: -$165,000
• Net: $32,300

Scenario B: $215,000 - $2,000 Concessions

• Sale price: $215,000
• Commission (6%): -$12,900
• Title/closing: -$2,500
• Concessions: -$2,000
• Mortgage payoff: -$165,000
• Net: $32,600

You actually net MORE with the lower price!

The Bottom Line

Seller concessions are normal in many North Carolina transactions, especially with FHA/VA buyers and in the lower to mid price ranges.

Key Takeaways:

• Concessions come out of your pocket
• They're negotiable
• Maximum limits apply by loan type
• May make sense strategically
• Always calculate your net proceeds
• Sometimes lower price + fewer concessions nets more

Don't automatically refuse concessions, but don't automatically agree either. Evaluate each request based on your situation and do the math.

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