By Eric Berman, REALTOR® | The Eric Berman Team at Compass
TL;DR:
A buyer concession is money the seller contributes at closing, and the first thing to know is that it's capped. Loan programs limit what a seller may contribute, with the ceiling varying by program and by the buyer's down payment — which means a seller who agrees to a credit above the limit has agreed to something the lender will not permit, and it gets discovered late. The second thing: a credit and a price reduction are not interchangeable. A reduction lowers the loan amount and the appraisal hurdle. A credit leaves both where they are and hands the buyer cash. Which one works depends on whether the buyer's problem is cash or affordability.
Concessions Are Capped, and Most Sellers Don't Know It
Start here, because it constrains everything else.
When a buyer is financing, the lender limits how much the seller may contribute toward the buyer's costs. The ceiling is set by the loan program and, in most programs, tiered by the size of the buyer's down payment — a buyer putting down more can generally accept a larger seller contribution than one putting down less. Occupancy type matters too, with investment properties treated differently from primary residences.
The consequence is practical and it catches people. A seller who negotiates a credit above the applicable cap has agreed to something the lender will not fund. That surfaces when the lender reviews the settlement statement, typically days before closing, and the parties have to rework the deal under time pressure — reducing the credit, converting part of it to a price reduction, or scrambling for another structure.
None of this is obscure to a mortgage professional, and the fix is straightforward: before agreeing to any concession, have the buyer's lender confirm the applicable limit for that specific loan. It takes one phone call and it prevents the most avoidable failure mode in concession negotiation.
The limits change, they differ across programs, and they turn on details of a particular buyer's file. Any specific figure a seller finds online may not apply to the transaction in front of them.
Credit or Price Reduction? They Do Different Things
This is the analytical heart of the topic, and it gets muddled constantly.
A price reduction lowers the contract price. That lowers the loan amount, lowers the buyer's monthly payment somewhat, and — importantly — lowers the number the appraisal has to support. It also becomes visible: a price change is public, appears in listing history, and carries a signal to everyone still watching.
A credit leaves the contract price where it is. The buyer still finances the same amount, still faces the same appraisal hurdle, and their monthly payment doesn't change. What they receive is cash at closing, which reduces what they need to bring to the table.
So the question isn't which one the buyer prefers. It's what constrains them. A buyer who is short on cash to close — down payment plus closing costs plus, above a million dollars, the Mansion Tax — is helped by a credit and barely helped by a modest price cut. A buyer who is constrained on monthly payment, or whose offer is running ahead of what the appraisal will support, is better served by a reduction.
The appraisal point deserves emphasis. When an offer sits above the comp set, a credit does nothing to reduce appraisal risk, because the contract price is unchanged. A reduction lowers the bar. Sellers who reach for a credit to solve an appraisal problem are using the wrong instrument.
One correction worth making, because the opposite is often claimed: concessions do not signal problems to the market. They appear in the contract and on the settlement statement, not in listing history. A price reduction is the visible move. If a seller is concerned about perception, the credit is the safer choice — the reverse of the usual advice.
Three Different Things Called Concessions
They get treated as interchangeable and they aren't.
Closing cost credits cover the buyer's transaction costs — lender fees, title charges, prepaid taxes and insurance. This is the most common request and it's usually a cash-to-close problem rather than a signal about the property. First-time buyers ask for it more than anyone, because assembling down payment and closing costs simultaneously is the hardest part of their purchase.
Repair credits substitute money for work after an inspection. The buyer takes cash instead of the seller arranging contractors. Sellers often prefer this — no coordination, no schedule risk, no arguments about workmanship. One limit worth knowing: a credit does not solve a condition the lender or appraiser will not accept. Where an appraisal comes back subject to repairs, the work has to be done, and a credit isn't a substitute. That interaction is covered further in what as-is actually means and doesn't.
Rate buydowns apply seller money to reduce the buyer's interest rate, either temporarily for the first years or permanently for the life of the loan. Dollar for dollar, this frequently moves a buyer's monthly payment further than either a price cut or a closing cost credit, because it attacks the payment directly. When affordability rather than cash is the constraint, it's usually the most efficient use of the same money — the mechanics are worked through in how interest rates affect a sale.
The Concession That Didn't Exist Before 2024
Since August 17, 2024, buyer-agent compensation is no longer posted on the MLS and is no longer offered automatically as a condition of listing. It's negotiated within each offer — which makes it, functionally, a seller concession.
This is now frequently the largest single concession in a transaction and sellers routinely fail to count it as one. A buyer asking the seller to contribute two and a half percent toward their agent is asking for a concession that dwarfs a typical closing cost credit. On an $850,000 sale that's roughly $21,000.
The practical implication for offer comparison: two offers at the same price can produce materially different proceeds depending on what each asks for in compensation. A seller evaluating concession requests has to count this one alongside the others rather than treating it as a separate category. The framework for comparing what each offer actually nets runs through how the terms stack.
The Post-Inspection Conversation
Most concession requests arrive after the inspection, which is a specific moment with a specific balance of leverage.
By then, contracts are signed or nearly so. The seller has committed to a timeline, may be under contract on a purchase elsewhere, and knows that returning to market means accumulated days on market and a weaker position. The buyer knows all of that too. Typical Long Island post-inspection concessions land somewhere between $3,000 and $15,000, with older housing stock and visible deferred maintenance pushing higher.
What a seller actually holds: the buyer has invested money in the inspection and the appraisal, has often given notice somewhere, and generally wants the house. Walking away costs them real money and time. That leverage is real but it isn't unlimited, and it erodes if the requested items are legitimate.
The useful distinctions when a request arrives. Safety and habitability items — a failed heating system, active water intrusion, electrical hazards — will likely resurface through the appraisal anyway, so conceding them is usually cheaper than fighting. Deferred maintenance the buyer could see — a roof visibly at the end of its life, dated systems disclosed and obvious — is generally already in the price, and a seller has a reasonable position for declining. Cosmetic items should be declined routinely.
The strongest preventive move is a pre-listing inspection. Knowing what an inspector will find, and either addressing it or pricing for it, converts the post-inspection negotiation from a surprise into a conversation the seller already prepared for. Sellers weighing where to spend beforehand will find the improvements that actually return their cost is a shorter list than expected.
A Worked Example
Consider a composite case — a Nassau County seller under contract at $872,000, whose buyer requested a $22,000 closing cost credit after the inspection.
Three things surfaced when the request was actually analyzed. First, the buyer's lender confirmed the applicable contribution limit for their loan, and $22,000 exceeded it. Agreeing as requested would have produced a problem at the closing table regardless of anyone's intentions.
Second, the inspection items breaking down the request were mostly cosmetic, with one legitimate exception — a water heater at the end of its service life, which an appraiser might well have flagged.
Third, the buyer's actual constraint was cash, not payment. They were stretched on cash to close, which meant a price reduction would have helped them far less than the same money delivered as a credit.
The resolution: a credit at the maximum the loan permitted, applied toward closing costs, plus the seller replacing the water heater directly rather than crediting for it. Total cost to the seller came in below the original request, the structure was one the lender would fund, and the closing held its date.
Where to Start
When a concession request arrives, have the buyer's lender confirm the applicable contribution limit before agreeing to anything. Determine whether the buyer's constraint is cash or monthly payment, because that decides between a credit and a reduction. Separate safety and habitability items from deferred maintenance and cosmetics. Count buyer-agent compensation as a concession when comparing offers. And run the net figure on any proposed structure rather than reacting to the headline request.
Sellers wanting a read on where their home sits before any of this begins can start with a quiet look at present value.
The Honest Bottom Line
Concessions are not a failure of negotiation. They're a mechanism for solving a specific buyer problem with seller money, and used correctly they close deals that would otherwise stall.
What sellers should avoid is agreeing to a structure the lender won't permit, or reaching for a credit when the actual problem is an appraisal that won't support the price. Both are common, both are avoidable, and both come down to understanding what each instrument actually does.
The number that matters is never the concession amount in isolation. It's what the seller nets after everything, compared against the alternative — including the alternative of a deal that doesn't close. Sellers working through a specific request, with no pressure attached, are welcome to start that conversation whenever it suits them.
This is general information, not legal, lending, or financial advice. Seller contribution limits vary by loan program, down payment, and occupancy type, and they change. Confirm the applicable limit with the buyer's lender and consult a licensed New York real estate attorney on contract terms.
FAQs
Is there a limit on how much a seller can contribute toward a buyer's costs?
Yes, and it's the fact most sellers don't know. When a buyer is financing, the loan program caps seller contributions, and the ceiling generally varies by program and by the size of the buyer's down payment — a larger down payment usually permits a larger contribution. Occupancy type matters too. A seller who agrees to a credit above the cap has agreed to something the lender will not fund, which surfaces when the settlement statement is reviewed days before closing. Have the buyer's lender confirm the applicable limit before agreeing to anything.
Should a seller give a credit or reduce the price?
It depends on what constrains the buyer. A price reduction lowers the loan amount, lowers the appraisal hurdle, and modestly reduces the monthly payment — but it's public and appears in listing history. A credit leaves the price and the appraisal hurdle unchanged and hands the buyer cash at closing, which solves a cash-to-close problem. A buyer short on cash is helped far more by a credit. A buyer constrained on monthly payment, or whose offer sits above what the appraisal will support, is better served by a reduction.
Do buyer concessions make a home look like it has problems?
No, and the common advice on this is backwards. Concessions appear in the contract and on the settlement statement — they are not visible to the market and do not appear in listing history. A price reduction is the public move and the one that carries a signal to buyers still watching. If a seller is concerned about perception, a credit is the safer instrument. What can raise questions is the pattern of inspection items behind a request, which is a different issue from the concession itself.
How much do post-inspection concessions typically cost on Long Island?
Usually somewhere between $3,000 and $15,000, with older housing stock and visible deferred maintenance pushing toward the upper end. The negotiation happens after contracts are signed, when the seller has committed to a timeline and has less leverage than at the offer stage. Safety and habitability items are generally worth conceding, since an appraiser may flag them anyway. Deferred maintenance the buyer could plainly see is usually already reflected in the price. A pre-listing inspection substantially reduces exposure by removing the surprise.
Is buyer-agent compensation a concession?
Functionally, yes, and it's now often the largest one. Since August 17, 2024, buyer-agent compensation is no longer posted on the MLS or offered automatically — it's negotiated within each offer. A buyer asking the seller to contribute two and a half percent is requesting a concession that dwarfs a typical closing cost credit; on an $850,000 sale that's roughly $21,000. Sellers comparing offers should count it alongside other concessions rather than treating it separately, since two offers at the same price can net very differently.
By Eric Berman, REALTOR® | The Eric Berman Team at Compass
Eric Berman | Long Island & Queens Associate Broker | Compass
1468 Northern Blvd, Manhasset, NY 11030
(917) 225-8596 | eric@ericbermanre.com | theericbermanteam.com
