More than half of the closings I’ve worked in the Phoenix Metro this year included some kind of seller concession. If you’re buying right now and nobody has mentioned asking for one, you’re likely leaving money on the table. If you’re selling, understanding how concessions work — and where your real limits are — will help you negotiate from a position of knowledge instead of guesswork.
What Is a Seller Concession, Exactly?
A seller concession is money the seller agrees to contribute toward the buyer’s costs at closing, instead of (or in addition to) lowering the purchase price. It shows up as a credit on the closing statement rather than a change to the recorded sale price. That distinction matters more than most buyers realize — a $450,000 home with a $10,000 concession still records as a $450,000 sale, which matters for appraisal comparables, property tax assessments in future years, and the seller’s own sense of what they “got” for the house.
Concessions are not the same as the seller simply accepting a lower offer. A price reduction lowers what you owe on the loan permanently. A concession is a one-time credit that typically goes toward closing costs, prepaid items (property tax and insurance reserves), or a temporary or permanent rate buydown. I wrote a full breakdown of when each option actually saves a buyer more money in Rate Buydown vs. Price Reduction: Which Saves a Phoenix Buyer More? — if you’re choosing between the two, that’s worth reading before you write an offer.
Why More Than Half of Phoenix Sales Now Include One
This isn’t charity on the seller’s part — it’s math. With roughly 3.6 months of supply and an average of 73 days on market across Maricopa County (see my full market update for the current numbers), sellers are competing for a smaller pool of qualified, motivated buyers than they were a few years ago. A buyer today who’s approved at a certain monthly payment is far more sensitive to interest rate than to sticker price. Sellers who understand that are using concessions — often structured as a rate buydown — to make their home’s effective monthly payment lower without cutting the price and resetting expectations for every other buyer watching that listing.
For a seller, a $12,000 concession that gets a buyer from 6.65% to something closer to 5.5% for the first year or two can be the difference between an accepted offer this month and another price reduction next month.
The Two Main Ways Sellers Can Help
Closing cost credits. This is the simplest version — a flat dollar credit applied to the buyer’s loan origination fees, title fees, appraisal, recording fees, and prepaid escrow items. It reduces how much cash you need at the table but does nothing to your monthly payment.
Rate buydowns. The seller’s money instead funds a temporary reduction in your interest rate (a 2-1 buydown, for example, drops your rate 2% in year one and 1% in year two before returning to the note rate) or, less commonly at this concession size, permanent discount points that lower your rate for the life of the loan. A rate buydown helps your monthly cash flow rather than your closing cash — which one you want depends on whether you’re cash-constrained right now or payment-constrained long term.
Many buyers don’t realize they can ask for a mix of both, or ask the seller to fund the buydown and negotiate the loan officer’s fees separately. Your lender should be able to run the numbers both ways within about 24 hours of you asking.
How Much Can You Actually Ask For? Loan-Type Limits
This is where a lot of buyers — and honestly, some agents — get it wrong. Concession limits are set by loan type and loan-to-value ratio, not by however much the seller is willing to give.
- Conventional loans: 3% of the purchase price if you’re putting down less than 10%, 6% if you’re putting down 10-25%, and 9% if you’re putting down more than 25%. Investment properties are capped at 2% regardless of down payment.
- FHA loans: Capped at 6% of the purchase price regardless of down payment.
- VA loans: No specific percentage cap for concessions covering closing costs and buydowns, but VA rules cap “seller concessions” (a separate, broader category covering things like paying off buyer debt) at 4% — closing costs and discount points are typically excluded from that 4% cap, which is a nuance worth confirming with your lender.
- USDA loans: Capped at 6% of the purchase price.
The limit is calculated against the purchase price, not against your loan amount, and it’s a ceiling — not a target. If your actual closing costs and prepaids only add up to $8,000, asking for a $20,000 “concession” under a conventional 6% cap won’t work; the excess doesn’t just become cash back to you. Your lender needs to confirm the number before you write it into an offer.
How to Structure the Ask in Your Offer
Concessions get requested in the purchase contract itself, as a specific dollar figure or percentage, itemized as “seller to pay $X toward buyer’s closing costs and/or rate buydown.” A few things that make the ask land better in a competitive-but-not-crazy market like this one:
Get your lender’s number first. Know your actual closing costs and what a buydown would cost to fund before you name a figure — asking for round numbers that don’t map to anything makes agents on the other side skeptical.
Frame it as part of the offer, not an add-on after acceptance. A $460,000 offer with a $10,000 concession request reads very differently to a seller than a $450,000 offer with a “by the way, can you also cover closing costs” follow-up.
Be willing to trade. If a seller balks at the dollar figure but the home has sat 60+ days, ask your agent to check what price reduction they’ve already discussed internally — sometimes a seller who won’t cut price by $10,000 will absolutely fund a $10,000 concession, and vice versa. It’s a psychological difference more than a financial one for a lot of sellers.
When Sellers Say No — and What to Do Instead
Not every seller will negotiate a concession, particularly on well-priced homes in tight micro-markets like good school zones or homes with updated kitchens and pools. If a concession request is rejected outright, don’t assume the deal is dead. Ask your lender about lender credits (trading a slightly higher rate for cash toward closing) or look at whether the price itself has room to move instead. And if you’re comparing this home against new construction, know that builders often have far more flexibility on incentives than individual sellers — I cover that trade-off in Builder’s Rate vs. a Resale Home: What’s the Real Cost?
Common Mistakes Buyers Make With Concessions
The biggest one is not looping in your lender before you write the offer — find out your loan type’s cap and your actual cost estimate first, not after you’re already under contract. The second is treating the concession as free money instead of understanding it’s baked into the negotiation; sellers do factor it into what they’re willing to accept on price. The third is forgetting that a bigger down payment can unlock a higher concession cap on a conventional loan, which sometimes makes it worth adjusting your down payment strategy specifically to access more seller-paid help. If you’re still working out what you can comfortably afford before all of this, start with How Much House Can I Afford in Phoenix, AZ?
What This Means If You’re Selling
If you’re listing a home this fall, assume a concession request is coming and decide ahead of time whether you’d rather protect your recorded sale price with a concession or take a straight price cut. Talk to your agent about running both scenarios — net proceeds can end up nearly identical, but one option keeps your comps looking stronger for the neighborhood and one doesn’t. Pricing your home accurately from day one still matters more than either strategy; an overpriced listing that eventually needs both a price cut and a concession loses far more than a well-priced one that offers a concession upfront.
FAQ
Does a seller concession count as taxable income to the seller? No. A concession reduces the seller’s net proceeds from the sale; it isn’t separate income and doesn’t get reported as such. It does reduce the seller’s bottom line the same way a price reduction would.
Can I ask for a concession on a cash offer? There’s less to ask for since there are no loan closing costs or points to fund, but you can still request the seller cover title fees, escrow fees, HOA transfer fees, or a home warranty. Just don’t call it a “seller concession” in the contract if there’s no loan involved — structure it as specific credits instead.
Will asking for a concession make my offer less competitive against other buyers? It can, if the seller is comparing net numbers across multiple offers. That’s exactly why it needs to be built into your offer price strategically rather than tacked on as an afterthought — your agent should be running the seller’s likely net on your offer versus what they’re seeing elsewhere.
The Bottom Line
Seller concessions aren’t a loophole or a sign of a desperate seller — in the Phoenix market we’re in right now, they’re simply part of how deals get structured. Know your loan type’s limit, get real numbers from your lender before you ask, and decide upfront whether closing cash or monthly payment relief matters more to you. That’s the difference between asking for $10,000 and actually getting it.
Call Mike at (480) 201-3700 or contact me at https://mikecaruso.idxbroker.com/idx/contact to talk through what a concession request could look like on a specific home you’re considering.
Mike Caruso | HomeSmart Elite, Chandler AZ | License SA540586000 | 22+ years | 500+ homes sold
