What a seller concession is
A seller concession is a negotiated seller contribution toward buyer costs that the purchase agreement, lender, and closing rules permit. Depending on the loan and documents, it may be used for eligible closing costs, prepaid items, discount points, or another approved purpose.
A concession may reduce the buyer's cash needed at closing, but it does not become unrestricted cash to the buyer. For the seller, compare the price and concession together because an agreed contribution generally reduces proceeds relative to the same price without that contribution.
How concessions work in Michigan
A concession should be stated clearly in the negotiated documents and then reflected in the lender-approved closing figures. The agreement should identify the amount or method and the intended use without assuming the full amount will be available for every charge.
Loan programs apply different definitions and limits to interested-party contributions and concessions. The treatment can depend on the loan type, occupancy, down payment, appraised value, and purpose of the credit. The buyer's lender must confirm the current limit and how unused or ineligible amounts would be handled before the parties rely on them.
Tax prorations and transfer taxes are separate line items whose allocation depends on law and the purchase agreement; they should not be described as buyer costs automatically covered by a concession. Both parties should review the lender and closing-provider figures showing how the contribution is applied.
How to evaluate a concession request
- Include the proposed contribution when estimating net proceeds and comparing offers.
- Confirm the buyer's loan program allows the requested concession amount.
- Decide whether a price reduction or a concession is the cleaner structure for your situation.
- Distinguish a closing credit from an agreement requiring repairs, and document the chosen structure clearly.
- If the lender requires an appraisal, ask how the price and concession affect underwriting and value review.
How concessions affect your net
At an otherwise unchanged sale price, an agreed seller contribution reduces estimated net proceeds. See our guide toseller net proceeds for how to run the math after concessions, transfer taxes, and closing costs.