Concessions in real estate are financial or non-financial incentives offered by the buyer or seller to help close a deal. They are typically negotiated during the offer and acceptance process, and can be used to make the home more affordable for the buyer or to sweeten the deal for the seller.
Types of Concessions
1. Seller Concessions
Seller concessions are the most common type of concession, and they can include a variety of things, such as:
- Paying for closing costs
- Providing a credit towards repairs or maintenance
- Installing new appliances or fixtures
- Repairing any damage to the property
- Offering a reduced purchase price
- Covering moving expenses
2. Buyer Concessions
Buyer concessions are less common, but they can include things like:
- Offering a higher purchase price
- Waiving certain contingencies
- Agreeing to a shorter closing deadline
- Allowing the seller to lease back the property after closing
When to Ask for Concessions
As a buyer, you should consider asking for concessions if:
- The property needs repairs or updates
- The property is overpriced
- The market is competitive
You are pre-approved for a loan and have a strong financial position
As a seller, you may want to offer concessions if:
- Your home has been on the market for a long time
- Your home needs repairs or updates
- The market is slow
- You are competing with other similar homes
When might sellers offer concessions?
Sellers may be more likely to offer concessions in a buyer’s market, when there are more homes for sale than there are buyers. They may also be willing to offer concessions if their home is overpriced, or if it has been on the market for a long time.
When might buyers ask for concessions?
Buyers may ask for concessions if they are struggling to afford the closing costs, or if they want the seller to make certain repairs to the home. Buyers may also ask for concessions if they are buying a home in a competitive market.
How to negotiate concessions
If you are considering asking for concessions, it is important to be prepared to negotiate. Here are a few tips:
- Do your research. Before you make an offer, research the market value of the home and comparable homes in the area. This will help you to determine what a fair price is for the home and what concessions you may be able to negotiate.
- Be prepared to walk away. If the seller is not willing to offer the concessions you are asking for, be prepared to walk away from the deal. There are other homes out there, and you don’t want to overpay for a home or agree to concessions that you are not comfortable with.
- Work with a real estate agent. A real estate agent can help you to negotiate with the seller on your behalf and can advise you on what concessions are reasonable to ask for.
How concessions affect the buyer and seller.
For buyers, concessions can make a home more affordable by reducing the upfront costs associated with buying a home, such as closing costs and repairs. This can be especially helpful for buyers who are stretched financially or who have limited savings.
For sellers, concessions can be a way to sell their home faster or for a higher price. For example, a seller may be willing to offer closing cost assistance to a buyer who is willing to waive an inspection contingency. This can make the offer more attractive to buyers and help the seller close the deal more quickly.
Examples of concessions in real estate transactions.
Here are a few examples of how concessions can be used in real estate transactions:
- A buyer makes an offer on a home that is overpriced. The seller agrees to lower the asking price by $5,000 in exchange for the buyer paying for closing costs.
- A home inspection reveals that the roof needs to be replaced. The seller agrees to pay for the roof replacement in exchange for the buyer waiving the inspection contingency.
- A buyer is a first-time homebuyer and has limited savings. The seller agrees to pay for 50% of the buyer’s closing costs.
- A seller is in a hurry to sell their home and needs to close quickly. The buyer agrees to waive the appraisal contingency and the seller agrees to reduce the asking price by $2,000.
Conclusion
Concessions can be a great way to make a home more affordable for the buyer or to sweeten the deal for the seller. If you are considering asking for concessions, be sure to do your research, be prepared to negotiate, and work with a real estate agent.
Frequently Asked Questions (FAQ)
What are concessions in a real estate transaction?
Concessions in a real estate transaction are incentives or discounts offered by the buyer or seller to help close the deal. They can be financial or non-financial in nature. Financial concessions can include paying for closing costs, making repairs, or giving a price reduction. Non-financial concessions can include things like agreeing to a shorter closing date or allowing the buyer to rent the property back from the seller after the sale is closed.
What is an example of a concession?
Common examples of concessions include:
- The seller paying for the buyer’s closing costs
- The seller making repairs to the home that were identified during the home inspection
- The seller giving the buyer a price reduction
- The buyer agreeing to a shorter closing date
- The seller allowing the buyer to rent the property back from the seller after the sale is closed
What does it mean to offer concessions?
To offer concessions means to offer the buyer or seller something of value in order to make the deal more attractive to them. For example, a seller might offer to pay for the buyer’s closing costs in order to get the buyer to raise their offer.
What does make a concession mean?
To make a concession means to give in to the demands of the other party in a negotiation. For example, if a buyer is asking for the seller to pay for closing costs, the seller might make a concession by agreeing to do so.
Why is it called concessions?
The term “concessions” is used in real estate transactions because it comes from the legal concept of contract law. In contract law, a concession is a term of the contract that is agreed to by one party in order to induce the other party to enter into the contract.
How do concessions work?
Concessions are typically negotiated between the buyer and seller and are included in the purchase agreement. The purchase agreement will specify what concessions are being offered and who is responsible for paying for them.
Does concession mean agreement?
Yes, a concession is a type of agreement. When one party makes a concession to the other party, they are essentially agreeing to give them something of value.
Why is concession important?
Concessions can be important in real estate transactions because they can help to bridge the gap between the buyer and seller’s expectations. For example, if a buyer is asking for a price reduction, the seller might offer to pay for closing costs instead. This can help to keep the deal on track and avoid a stalemate.
How do you make concessions?
To make a concession, you need to be willing to give up something of value in order to get something else that you want. For example, if you are a buyer, you might be willing to offer a higher purchase price in exchange for the seller making repairs to the home.
What are the concessions in sales?
Sales concessions are similar to real estate concessions in that they are incentives offered by a seller to a buyer in order to make a sale. However, sales concessions are typically offered on goods and services, such as cars, furniture, and electronics. Common sales concessions include discounts, rebates, and free shipping.
