Purchase Price vs. Seller Concessions: Which Should You Negotiate?
You find a house listed for $450,000.
It's been sitting for a little while, the seller seems motivated, and your Realtor thinks there's room to negotiate.
Naturally, your first thought is probably:
"How much can we get them to come down on the price?"
That's a perfectly reasonable question.
But it's not always the best one.
Sometimes getting the seller to reduce the price by $10,000 saves you less money than getting that same seller to contribute $10,000 toward your closing costs.
Sometimes using those concessions to buy down the interest rate can have a much bigger impact on your monthly payment than lowering the purchase price.
And sometimes the lower purchase price really is the better deal.
The point is that a dollar negotiated isn't necessarily a dollar of equal value.
Before deciding what to ask the seller for, let's figure out what you're actually trying to accomplish.
Let's Start With a Simple Example
Let's say you're buying a home for $450,000.
The seller is willing to give up $10,000 to make the deal happen.
For simplicity, let's assume the property appraises and the financing allows the concession we're discussing.
You essentially have two ways you might negotiate:
Option 1: Reduce the purchase price to $440,000.
Option 2: Keep the purchase price at $450,000 and negotiate $10,000 in seller concessions.
At first glance, the $440,000 price sounds better.
You bought the house for $10,000 less.
Who doesn't like that?
But now let's look at what actually happens financially.
What Does a $10,000 Price Reduction Really Do?
A lower purchase price absolutely has value.
It can reduce your required down payment.
It can reduce your loan amount.
It can lower your monthly principal and interest payment.
It may also affect other parts of the transaction depending on the financing.
All good things.
But here's what surprises a lot of buyers:
You aren't paying the entire $10,000 today.
You're financing most of the house over a long period of time.
So if your loan amount decreases by several thousand dollars, your monthly payment may only decrease by a relatively modest amount.
That's not an argument against negotiating the price.
It's an argument for understanding what the price reduction actually accomplishes before automatically choosing it.
Now Look at the Same $10,000 as Seller Concessions
Instead of lowering the price, let's say the seller agrees to contribute $10,000 toward your allowable costs.
Depending on the loan program and transaction, those funds may potentially be used toward things like:
Closing costs
Prepaid expenses
Discount points
A temporary interest-rate buydown
Other eligible transaction costs
Now that $10,000 may reduce the amount you need to bring to closing by thousands of dollars.
For a first-time buyer, that can be a very big deal.
You may be able to keep more money in savings.
You may avoid draining your emergency fund.
You may have cash available for moving, furniture, repairs, or improvements.
Or we may be able to use some of the concession to improve the financing itself.
Same seller.
Same willingness to negotiate.
Same $10,000.
Completely different impact.
This Is Why I Don't Like Negotiating in a Vacuum
Your Realtor is negotiating the real estate contract.
I'm helping you structure the financing.
Those two things should be talking to each other.
If your Realtor calls me and says:
"Mark, I think we can get $12,000 out of this seller. Where does it help the buyer the most?"
That's a conversation I love.
Maybe the answer is price.
Maybe it's closing costs.
Maybe it's an interest-rate buydown.
Maybe it's some combination.
We can run the numbers before the offer is written and figure it out.
That's much better than negotiating a $12,000 price reduction first and asking whether there was a better way to use it afterward.
Why Seller Concessions Can Be So Valuable for First-Time Buyers
Cash is usually one of the biggest constraints for first-time homebuyers.
You have the down payment.
Closing costs.
Homeowners insurance.
Potential escrow funding.
Inspections.
Moving expenses.
And then you actually own the house.
That's when you discover you apparently need to make seventeen trips to Home Depot during your first month.
Keeping an extra $5,000, $10,000, or $15,000 in the bank after closing can matter.
A lot.
Let's say you could buy the house for $440,000 and have $4,000 left in savings after closing.
Or you could buy it for $450,000 with seller concessions and have $14,000 left afterward.
Which is better?
I don't know yet.
But I'm definitely not making that decision based solely on which contract has the lower purchase price.
[Learn more: How Much Money Do You Really Need to Buy Your First Home?]
Seller Concessions Can Potentially Buy Down Your Interest Rate
This is where the comparison gets even more interesting.
Seller concessions may potentially be used toward discount points to reduce your interest rate, subject to the loan program and transaction.
Let's say lowering the purchase price by $10,000 only reduces your payment modestly.
What happens if we keep the higher price and use some or all of that $10,000 to reduce the interest rate instead?
Depending on current pricing, the loan amount, and how long you expect to keep the mortgage, the payment impact could be considerably larger.
But don't automatically assume buying down the rate is the right answer either.
We still need to calculate the cost.
How much does the lower rate save each month?
How much does it cost to get that rate?
What's the break-even period?
How long do you expect to keep this mortgage?
If you're spending $8,000 to save $80 per month, I want to talk about that before we celebrate the lower rate.
[Learn more: Why the Lowest Mortgage Rate Isn't Always the Best Mortgage]
What About a Temporary Buydown?
Seller concessions may also potentially be used to fund a temporary interest-rate buydown when the loan program and transaction allow it.
A common example is a 2-1 buydown.
With a properly structured 2-1 buydown, the borrower's effective payment is reduced during the first two years through funds placed into a buydown account.
That can create meaningful payment relief early in homeownership.
This can be attractive for certain buyers.
Maybe you're expecting income growth.
Maybe you're coming out of an expensive season of life.
Maybe you'd simply rather have a lower effective housing payment during the first couple of years.
But there's an important distinction.
A temporary buydown doesn't permanently change the note rate on your mortgage.
It's a temporary payment subsidy.
That doesn't make it bad.
It just means we need to understand what we're actually buying.
What If I Just Want the Lowest Possible Monthly Payment?
Then let's solve for that.
This is where I want buyers to tell me what actually matters to them.
If your number one priority is getting the lowest sustainable monthly payment, our strategy may look one way.
If your number one priority is keeping as much cash as possible after closing, it may look another way.
If you're planning to own the house for ten years and expect to keep the mortgage for a long time, paying upfront for a lower permanent rate may deserve more consideration.
If you think there's a reasonable chance you'll move or refinance within a few years, spending a large amount upfront for a lower rate might not make as much sense.
There is no universally correct use of a seller concession.
There is only the use that best solves your problem.
What If I Have Plenty of Cash?
Then seller concessions can still be useful.
You don't have to be short on money for closing costs to matter.
Let's say you have $100,000 available.
You could easily cover the down payment and closing costs yourself.
That doesn't automatically mean you should.
If the seller is willing to contribute $10,000, I'd still like to figure out where that money creates the greatest benefit.
Maybe we reduce your cash to close and you keep the additional liquidity.
Maybe we buy down the rate.
Maybe the price reduction is better.
Having money gives you more options.
It doesn't mean we stop caring about how efficiently it's used.
Seller Concessions Have Limits
This part matters.
A seller can't necessarily contribute any amount they want toward your costs.
The maximum allowable seller contribution can depend on several factors, including:
The loan program.
Your down payment.
Occupancy.
The type of costs being paid.
The actual amount of eligible closing costs.
There can also be different rules for Conventional, FHA, VA, and other loan programs.
So if you're thinking:
"Perfect. We'll just ask for $40,000 in concessions."
Call me first.
We need to make sure the financing actually allows us to use what you're negotiating.
Unused seller concessions generally aren't something we want to discover at the closing table.
More Seller Concessions Aren't Always Better
Here's another mistake I see.
A buyer negotiates a large seller concession and assumes every dollar will automatically benefit them.
Not necessarily.
Seller concessions generally need eligible costs to offset.
If you've negotiated $15,000 in concessions but only have $9,000 of eligible costs we can use them toward, we need to determine whether there are other legitimate ways to use the remaining amount within the program guidelines.
Maybe a rate buydown makes sense.
Maybe there are other eligible expenses.
Maybe we should have negotiated the contract differently.
This is why I want to run the financing before you finalize the offer.
We want useful concessions.
Not decorative ones.
What About the Appraisal?
This is an important piece of the strategy.
You can't simply inflate a purchase price to manufacture seller concessions without regard to the property's value and loan requirements.
The home still needs to support the transaction.
If you're purchasing at $450,000 with seller concessions and the appraisal comes in below the contract price, we may have another issue to solve.
That's why the Realtor's market analysis matters.
The lender's financing analysis matters.
And the appraisal matters.
We're trying to structure a good deal, not play games with the price.
Lower Price Can Still Be the Better Choice
I've spent a lot of this article explaining why seller concessions can be more powerful than buyers realize.
That doesn't mean I always prefer concessions.
Sometimes the lower price wins.
Maybe you already have more than enough cash for closing.
Maybe current rate pricing makes a buydown unattractive.
Maybe the concession wouldn't provide much additional value.
Maybe we're already receiving enough concessions to cover the costs we want covered.
Maybe you plan to keep the property for a very long time and simply want to reduce the amount you're borrowing.
Maybe the lower purchase price puts you in a better position for the specific financing we're using.
Great.
Negotiate the price.
The point isn't that seller concessions are better.
The point is that you should compare them.
Sometimes the Best Answer Is Both
Real estate negotiations don't have to be all or nothing.
Maybe instead of asking for:
$10,000 off the price
or
$10,000 in seller concessions,
we negotiate:
$5,000 off the price and $5,000 toward closing costs.
Or another combination that makes sense.
This is especially useful when we have enough seller contribution to accomplish one goal but don't need the entire amount there.
Again, run the numbers.
We're not trying to win a theoretical argument about whether price or concessions are better.
We're trying to structure your purchase intelligently.
Here's the Conversation I Want Before You Make an Offer
When you find a house you like, send it to me.
I want to look at the actual property.
We'll estimate the property taxes.
We'll account for homeowners insurance.
We'll look at HOA dues if there are any.
We'll update the payment.
We'll estimate your cash to close.
Then, if your Realtor believes there's room to negotiate, we can model different scenarios.
What happens with $10,000 off the price?
What happens with $10,000 in concessions?
What happens if we use those concessions toward closing costs?
What happens if we use them toward the rate?
What happens if we split the difference?
Now your Realtor can negotiate knowing which outcome actually helps you most.
That's mortgage strategy.
Don't Let the Contract Price Become an Ego Thing
This is worth saying.
Buyers understandably want to feel like they got a deal.
If a house is listed for $450,000 and you buy it for $435,000, that feels good.
You can tell your friends you negotiated $15,000 off.
Nobody at dinner is going to be nearly as impressed when you say:
"We paid $445,000, but the seller gave us $15,000 toward closing costs and financing."
I get it.
The first story sounds better.
But your bank account doesn't care which story sounds better.
Neither does your monthly budget.
I'd rather structure the transaction that leaves you in the better financial position.
You can tell your friends whatever you want.
One More Thing: Don't Wait Until After the Offer Is Accepted
This is where coordination between your lender and Realtor really matters.
Once the contract is signed, we can sometimes renegotiate things.
But I'd rather have the strategy figured out before we submit the offer.
Your Realtor should know:
How much cash you're trying to preserve.
What your comfortable payment is.
Whether seller concessions would materially help.
Whether we're considering a rate buydown.
Whether there are financing limitations we need to respect.
That information can make the offer more strategic from the beginning.
[Learn more: Mortgage Pre-Qualification vs. Pre-Approval: What's the Difference?]
So, Should You Negotiate Price or Seller Concessions?
Don't decide based on which number looks better on the contract.
Figure out what you're trying to improve.
If you're trying to reduce your loan balance and long-term cost, a lower price may be valuable.
If you're trying to preserve cash, seller concessions may be more powerful.
If you're trying to reduce the monthly payment, we should compare a price reduction with an interest-rate strategy.
If you have multiple goals, maybe we use a combination.
The seller may only be willing to give up a certain amount.
Our job is to make that amount work as hard as possible for you.
That's the part buyers often miss.
Negotiating the house is one thing.
Structuring the financing around the negotiation is another.
The best transactions do both.
If you're buying a home in Dallas-Fort Worth or anywhere in Texas, send me the property before you make the offer.
I'll help you run the different financing scenarios so you and your Realtor can see what the negotiation actually does to your payment, cash to close, and overall financial position.
Because "$10,000 from the seller" sounds great.
I want to make sure it actually is.
You can learn more about my team, read our client reviews, or start a secure application at:
About Mark Karetskiy
Mark Karetskiy
Mortgage Strategist | Branch Leader | Loan Originator
Movement Mortgage
NMLS #1254891
Licensed in TX, NM, CA & OH
Mark Karetskiy is a Mortgage Strategist with Movement Mortgage serving homebuyers, homeowners, veterans, and real estate investors. With more than twelve years in the mortgage industry and hundreds of families served, Mark focuses on strategic mortgage planning, creative financing solutions, and helping clients understand how their mortgage fits into their bigger financial picture.
Whether it's buying a first home, using VA benefits, financing an investment property, refinancing, or solving a complicated scenario, his approach is simple: educate first, communicate clearly, and structure the financing around the client's goals instead of just selling a rate.
Movement Mortgage is licensed in all 50 states, giving Mark and his team the ability to help clients and referral partners with mortgage financing nationwide.
Work: 469-202-4195
Cell: 857-544-3158
Office: 5840 Legacy Circle, Ste 250, Plano, TX 75024
Website: www.LoanOfficerMark.com
Book a Consultation: www.calendly.com/loanofficermark
Continue Learning
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[How Much House Can I Actually Afford?]
[How Much Money Do You Really Need to Buy Your First Home?]
[Understanding Closing Costs: Where Does All That Money Go?]
[FHA vs. Conventional Loans: Which Is Better for a First-Time Buyer?]
[Down Payment Assistance: How Does It Actually Work?]
[Why Putting 20% Down Isn't Always the Smartest Financial Decision]
[Why the Lowest Mortgage Rate Isn't Always the Best Mortgage]