Seller Concessions Are Back: What St. Louis Buyers and Sellers Should Know

According to a recent report on St. Louis housing trends, there are more homes on the market today than at this time last year, and the median list price has fallen 4.7% year over year. As buyers gain more negotiating power, sellers are finding ways to make their homes more financially appealing to buyers.

One strategy is to offer seller concessions—financial incentives that help buyers cover certain expenses associated with purchasing a home. These may include closing cost assistance, a home warranty, or credits for needed repairs. By reducing buyers’ upfront expenses or addressing potential concerns about the property, seller concessions can make a home more attractive while allowing sellers to maintain their listing price.

Let's explore what seller concessions are, which options are worth considering, and when offering them might make sense.

A real estate concession is an agreement in which a home seller covers certain costs or offers financial incentives to help a buyer complete a real estate transaction. Rather than lowering the home's asking price, the seller agrees to pay for specific expenses or provide another negotiated benefit to make the purchase more attractive. 

Concessions can help bridge the gap between what a buyer needs in order to push the deal through, and what a seller is willing to accept to sell the property.   

Common examples of seller concessions include:

Closing cost assistance. Closing cost credits are negotiated during the offer stage and appear as part of the purchase and sale agreement. For example, a buyer may offer $310,000 on a home listed at $300,000, with a $10,000 credit back at closing—effectively netting the seller the same amount. This approach allows buyers to finance their closing costs as part of the mortgage while keeping upfront expenses lower, which is especially attractive to first-time buyers who might not have a large down payment.

Repair credits. When a listing doesn’t pass a home inspection or has any other big issues, buyers are likely to back out if expensive repairs are needed. Rather than the seller paying to fix the problems himself, he can offer credits to be paid to the buyer at closing that will go towards repairs. For instance, let’s say that an older home in Crestwood needs a new roof. By offering a $12,000 repair credit, the sale can still go through without having to wait for the buyer to put on a new roof. Seller credits are often attractive to buyers who want to choose their own contractor and materials, and those who are eager to take possession of the home. 

Home warranty. Offering a home warranty as a seller concession can be a relatively affordable way to make a home appeal to buyers without lowering the asking price. For less than $1,000, a seller can give buyers peace of mind that if something goes wrong with appliances or major systems within a year after closing, they won’t be on the hook for major repairs.  

Mortgage-rate buydowns. This is when a seller pays money toward reducing a buyer's mortgage interest rate, helping to make the monthly mortgage payment more affordable. A temporary buydown lowers the buyer's effective interest rate for the first few years of the loan. The seller typically pays an upfront amount into a fund that subsidizes the buyer's payments during that period. A permanent buydown reduces the interest rate for the life of the loan. The seller contributes money toward the lender's discount points, which can lower the buyer's interest rate for the entire mortgage term. For example, instead of reducing a $300,000 listing price by $10,000 to fit the buyer’s budget window, a seller could offer a negotiated contribution toward the buyer's mortgage rate buydown to make payments more affordable.

Real estate concessions can help buyers and sellers reach an agreement, but it's important to understand the terms before committing. Whether you're selling a home in St. Louis or negotiating to buy one, keep a few factors in mind. 

First, comparing concessions with a price reduction can be constructive. A concession can offer more value to a buyer than a lower purchase price, particularly when help with upfront expenses is the priority. However, sellers should compare the cost of the concession with the potential impact of reducing the price to make sure it’s the most sensible step forward.  

Next, keep in mind that not every concession is permitted under every loan, and closing-cost credits may be subject to lender restrictions. Most lenders cap the allowable credit based on the loan type, so lenders will need to confirm what’s allowed based on the loan and down payment structure.

Finally, make sure to get everything in writing. Repair agreements, credits, and other seller concessions for buyers should be documented through the appropriate contract amendments with the help of the real estate agents involved. Otherwise, it’s possible for either party to go back on their word on closing day.

There’s a lot of detail that can go into a real estate concession. Both the seller and buyer should make sure they fully understand the deal. Working with a local real estate agent who understands concessions will ensure paperwork is accurate so everything goes smoothly in the negotiation process and everyone ends up satisfied with the result. The real estate agents at Berkshire Hathaway HomeServices Select Properties are highly knowledgeable about real estate in St. Louis, so contact us today for assistance.