Seller concessions are an important tool in many real estate transactions across Washington State. Whether you are buying or selling a home, understanding how concessions work can help you structure stronger offers, manage upfront costs, and close deals more efficiently.

This guide explains what seller concessions are, how they are used in the Washington real estate market, the rules that govern them, and how they can benefit both buyers and sellers. You’ll also learn how to calculate and negotiate concessions, avoid common misconceptions, and understand the role of real estate professionals in the process.

What are seller concessions?

Seller concessions are financial contributions made by the home seller to help cover certain costs associated with the buyer’s home purchase. Instead of reducing the listing price, the seller agrees to allocate a portion of their proceeds toward specific buyer expenses at closing.

Defining seller concessions in real estate

Seller concessions typically go toward the buyer’s closing-related expenses rather than lowering the home’s purchase price on paper. For example, if a home sells for $500,000 and the seller agrees to $10,000 in concessions, the sale price remains $500,000, but the buyer’s closing-related expenses are reduced by $10,000.

This approach helps buyers lower out-of-pocket expenses while allowing sellers to maintain their listing price and perceived home value.

Common types of seller concessions

Seller concessions in Washington State most commonly include:

• Closing cost assistance, such as loan origination fees, appraisal fees, title insurance, escrow charges, recording fees, and attorney fees
• Prepaid expenses, including property taxes, homeowner’s insurance premiums, or prepaid mortgage interest
• Discount points, which allow buyers to buy down their mortgage rate and reduce monthly payments
• Repair credits, where the seller offers a credit instead of completing repairs identified during the home inspection
• Home warranty coverage, which can provide buyers with peace of mind during the first year of homeownership
  
  

Why seller concessions matter in Washington State

Market conditions across Washington State can shift quickly, especially in areas like Seattle and surrounding cities. Seller concessions often become more relevant when inventory increases or buyer demand softens.

In a seller’s market, concessions are less common. In a balanced market or buyer’s market, offering concessions can be a strategic way to attract qualified buyers without reducing the listing price. Reviewing broader Seattle real estate market trends can help illustrate when concessions tend to become more common.

From the buyer’s perspective, high home prices across much of Washington State mean that closing-related expenses can add up quickly. Seller concessions help reduce upfront costs and make homeownership more accessible, particularly for first-time buyers.

Rules and concession limits in Washington State

Seller concession limits depend heavily on the buyer’s loan program. Exceeding these limits can cause delays or even jeopardize loan approval.

FHA loan guidelines

For FHA loans, sellers may contribute up to 6% of the lesser of the home’s purchase price or appraised value. These funds can be applied toward buyer’s closing costs, prepaid expenses, and discount points, but not toward the down payment.

VA loan guidelines

VA loans allow sellers to cover a wide range of buyer costs, but there is a 4% cap on certain interested party contributions such as prepaid expenses and discount points. VA loans often provide flexibility for eligible buyers seeking to reduce upfront expenses.

Conventional loan guidelines

Conventional loans have varying concession limits based on loan-to-value (LTV) ratio:

• Over 90% LTV: up to 3%
• 75.01% to 90% LTV: up to 6%
• 75% or less LTV: up to 9%
  
  

Investment properties are typically capped at 2% regardless of LTV.

All concessions must be fully disclosed and documented on the purchase agreement and closing disclosure to comply with state and federal regulations.

How seller concessions benefit buyers

For buyers, seller concessions primarily reduce the amount of cash needed at closing. Closing-related expenses in Washington State often range from 2% to 5% of the home’s purchase price. Concessions can significantly lower that burden.

Concessions may also allow buyers to allocate more funds toward a down payment, potentially improving loan terms or helping avoid private mortgage insurance. Buyers weighing different strategies often compare concessions with other options like seller credits or interest rate buy downs.

How seller concessions impact sellers

While concessions reduce a seller’s net proceeds, they can offer meaningful strategic advantages.

Offering concessions can attract a larger pool of buyers, particularly those who are strong candidates but limited by upfront costs. Concessions can also help a home sell faster, especially if it has been on the market longer than expected.

For sellers evaluating overall net proceeds, it’s helpful to understand related expenses like the cost to sell a house in Washington State when deciding whether concessions make sense.

Calculating and negotiating seller concessions

When determining an appropriate concession amount, buyers and sellers should consider:

• Current market conditions
• Property condition and inspection findings
• Buyer loan type and concession limits
• Overall transaction value
  
  

Buyers often request concessions after a home inspection or as part of a full-price offer in a competitive market. Sellers may prefer concessions over price reductions because they preserve the listing price and perceived value.

Understanding negotiation dynamics is especially important when weighing concessions versus faster alternatives like cash offers compared to traditional loans.

Common misconceptions about seller concessions

Seller concessions do not automatically signal a problem with the home. In many cases, they are simply a strategic tool to bridge financing gaps, manage buyer expectations, or respond to shifting housing market conditions.

When a buyer asks for and gets closing costs, if there is an amount remaining that the buyer does not use at closing, the remainder goes to the seller.

Concessions also do not usually lower a home’s appraised value. Appraisers account for standard concessions when evaluating comparable sales, as long as amounts remain within loan program limits.

From a tax standpoint, concessions generally reduce the seller’s net proceeds rather than creating separate tax deductions or taxable income.

The role of real estate professionals

Navigating seller concessions correctly requires coordination between your real estate agent and your lender.

A knowledgeable real estate agent helps buyers and sellers:

• Evaluate market conditions
• Structure concession requests within loan limits
• Draft compliant purchase agreements
• Negotiate terms that align with financial goals
  
  

Lenders ensure concessions align with the chosen loan program and do not jeopardize approval. Buyers and sellers who want guidance tailored to their situation can contact Every Door Real Estate for local expertise and strategic support.

Key takeaways for Washington State buyers and sellers

Seller concessions can be a powerful tool in Washington State real estate transactions. For buyers, they reduce upfront costs and make homeownership more attainable. For sellers, they can expand buyer demand and help close deals without lowering the listing price.

Understanding concession limits, market timing, and negotiation strategy allows both sides to use concessions effectively while protecting their financial outcomes.