I'm actually shopping for a car right now and as I’ve been doing my homework, I've been reminded of one of the oldest tricks in the car-buying playbook:
When sales are slow, don't necessarily slash the sticker price.
Throw in the floor mats. Waive a fee. Add an incentive. Buy down the rate.
Make the overall deal more attractive without making the advertised price look quite so different.
Home Sellers have their own version of floor mats.
Seller concessions.
And this year, they're showing up a lot!
In August, 44.7% of U.S. home sales included some type of Seller concession: closing costs, repairs, a rate buydown or another Buyer incentive. In Denver, that number was even higher, at 58.4%.
All that's missing is an inflatable tube man flailing around in the front yard.
Here's the important thing Buyers and Sellers need to understand:
A Seller concession isn't the same thing as a price reduction.
So, who's actually picking up the tab?
A Seller concession is when the Seller agrees to contribute toward certain costs associated with the Buyer's purchase.
Depending on the loan and the transaction, that might mean:
- Closing costs
- Prepaid taxes and insurance
- Certain lender fees
- A temporary or permanent interest-rate buydown
- Some negotiated expenses related to the transaction
For a Buyer, that can mean bringing less cash to the closing table or reducing the cost of financing.
For a Seller, it can be a way to make a property more attractive without simply dropping the asking price.
And that distinction matters.
But what about 6%?
This is where Buyers need to slow down before writing, "Seller to pay 6% of purchase price toward Buyer's closing costs."
For many conventional primary-residence and second-home loans, the maximum Seller contribution depends on the Buyer's loan-to-value ratio. Under current Fannie Mae guidelines, that can range from 3% to 9%.
For a Buyer putting between 10% and 24.99% down, for example, the maximum financing concession is generally 6%.
But and this is a big but the Buyer has to have allowable costs to use it for.
You can't necessarily ask for $36,000 on a $600,000 purchase and then put the leftover money in your pocket.
Your lender gets a vote.
This is one of those moments when I want my Buyers talking to their lender before we decide how to structure the offer.
Buyers: Think beyond the price
This is where today's market gets more interesting.
A Buyer doesn't necessarily have to choose between:
"Pay full price"
or
"Ask for a lower price."
There are more levers to pull.
Maybe the Seller contributes toward closing costs.
Maybe they pay for a rate buydown.
Maybe there's a repair credit.
Maybe the price comes down.
Maybe it's a combination.
The right strategy depends on the property, the Seller's situation, the Buyer's financing and what the numbers actually look like.
A $10,000 price reduction and a $10,000 concession are not necessarily worth the same thing to a Buyer.
That's a conversation worth having before deciding what to put in the offer.
Sellers: The floor mats aren't free
Here's the other side of the negotiation.
If you're selling a home in today's market, you may be competing with properties offering more than just a pretty kitchen and a mountain view.
Buyers are comparing the total cost of getting into the home.
And sometimes a Seller who is willing to contribute toward closing costs can make their home more compelling without taking the same amount directly off the purchase price.
But that doesn't mean every Seller should immediately offer 6%.
Just like Buyers shouldn't ask for concessions simply because they can.
The numbers have to make sense.
If your home is priced correctly, shows beautifully and has strong competition from Buyers, you may have little reason to offer an incentive.
If you're competing with several similar properties, particularly properties offering concessions and price reductions, that's a different conversation.
And this is where Colorado gets interesting
National housing statistics are useful because they show us where the broader market is headed.
But Colorado isn't one giant housing market.
Denver isn't Estes Park.
Estes Park isn't Fort Collins.
And what makes sense for a $600,000 suburban home isn't necessarily the same strategy for a mountain property with a well, septic system, insurance considerations or a second-home Buyer.
That's why I don't believe in taking a national headline and applying it blindly to a local transaction.
The market tells us what's happening. The property and the people tell us how to negotiate it.
So…who picks up the closing costs tab?
Sometimes the Buyer.
Sometimes the Seller.
And sometimes the answer is: it depends on how the deal is structured.
The important thing is understanding that price isn't the only thing being negotiated anymore.
Price. Concessions. Repairs. Financing. Timing. Terms.
They're all part of the conversation.
And if you're buying or selling a home, I'd much rather see you understand all of the levers available to you than focus on one magic number.
Because unlike the car dealer, there probably won't be an inflatable tube man to tell you when you've got a good deal.
