Can the Seller Pay My Closing Costs? How Seller Concessions Work in Colorado

Yes.

A seller can potentially pay thousands of dollars toward your closing costs when you buy a home.

And if you’re a first-time buyer, your Realtor should have already told you that negotiating the purchase price is not the only way to negotiate a good deal.

Sometimes I’m trying to get you a lower price.

Sometimes I’m trying to get repairs completed.

Sometimes I’m negotiating the terms of the transaction.

And sometimes one of the most valuable things I can negotiate is:

Seller concessions.

A seller concession — sometimes called a seller credit — is money the seller agrees to contribute toward certain costs you would otherwise have to pay as the buyer.

So imagine you’re buying your first home for $500,000 and we negotiate a $15,000 seller concession.

You’re still purchasing the home.

But now there may be $15,000 available to help cover eligible expenses associated with getting you to the closing table.

For a first-time buyer trying to keep money in the bank after purchasing a home, that can be incredibly valuable.

And when I’m negotiating for my buyers, I’m not only asking how low I can get the price.

I’m asking:

How can I structure this deal in a way that gives my buyer the most value?

What Exactly Is a Seller Concession?

Let’s keep this simple.

A seller concession is an agreement where the seller contributes money toward certain costs associated with your purchase.

The Consumer Financial Protection Bureau refers to these as seller credits and notes that buyers and sellers can negotiate for the seller to pay some of the buyer’s closing costs.

You might hear:

“The seller is giving us $10,000 in concessions.”

That does not normally mean the seller hands you a $10,000 check.

Instead, that credit appears in the transaction and is applied toward eligible expenses.

For example:

Purchase Price: $500,000
Seller Concession: $15,000

If you had $15,000 or more of eligible closing expenses, that seller contribution could potentially offset a substantial amount of money you otherwise would have had to bring to closing.

That’s why I pay attention to concessions.

Especially with first-time buyers.

What Can Seller Concessions Pay For?

Exactly what a concession can cover depends on your loan program, lender, contract, and actual closing expenses.

But seller concessions can commonly be used toward things such as:

• lender closing costs
• loan origination charges
• title-related costs
• certain prepaid expenses
• homeowners insurance costs due at closing
• property-tax and escrow-related expenses
• discount points
• certain interest-rate buydowns

Fannie Mae’s current conventional-loan guidelines allow qualifying seller contributions toward borrower closing costs and prepaid expenses, and seller-funded interest-rate buydowns are included in its concession rules.

The CFPB also explains that discount points are upfront charges used to obtain a lower mortgage interest rate.

That’s where the strategy can get interesting.

Because a seller concession might not just help you get into the house.

Depending on how we structure it with your lender, it might help improve the financial picture of owning the home as well.

Seller Concessions Usually Cannot Be Used for Your Down Payment

This is an important distinction.

Don’t think:

“Awesome. The seller gave me $15,000, so there’s my down payment.”

Generally, no.

For conventional Fannie Mae financing, seller contributions cannot be used to satisfy the borrower’s down payment, minimum borrower contribution, or required financial reserves.

They’re primarily there to offset qualifying transaction expenses.

And you generally can’t just ask for more seller credit than you actually have costs to use it against.

If your lender says you have $8,000 of eligible costs and we negotiated $15,000 in concessions, you typically aren’t receiving the unused $7,000 as cash after closing.

That’s another reason I want your lender involved in the negotiation.

Before I go asking for a giant concession, I want to know:

How much can my buyer actually use?

How Much Can a Seller Contribute?

There isn’t one universal percentage that applies to every mortgage.

Your loan program matters.

With many conventional Fannie Mae loans for a primary residence, current maximum financing concessions depend on the buyer’s loan-to-value ratio:

Loan-to-Value	Maximum Financing Concession
Greater than 90%	3%
75.01%–90%	6%
75% or less	9%

Fannie Mae calculates those limits using the lower of the sales price or appraised value, and the credit still cannot exceed the qualifying costs the borrower actually has.

Other programs have their own rules. FHA, VA, USDA and individual loan products don’t all treat every seller-paid item exactly the same way.

That’s lender territory.

My job isn’t to guess what your loan allows.

My job is to communicate with your lender and find out:

“How much seller concession can this buyer actually use, and where would it provide the most benefit?”

Then I can negotiate around real numbers.

Here’s Why This Matters So Much for First-Time Buyers

Let’s go back to the $500,000 home.

You’ve spent months saving money.

You’ve got your down payment.

You’ve got money for your inspection and appraisal.

You’re preparing for moving expenses.

And we’ve already talked about why I don’t want you completely draining your savings just to get the keys.

Now imagine your estimated eligible closing expenses are somewhere around $15,000.

If you pay all $15,000 yourself?

That’s another $15,000 leaving your bank account.

But if I can negotiate a meaningful seller concession and your lender approves how we’re using it?

That can potentially leave thousands of dollars in your pocket after closing.

Now that money can stay available for:

Furniture.

Moving expenses.

Emergency savings.

A future appliance replacement.

Maintenance.

Or simply having breathing room after making the biggest purchase of your life.

That’s real value.

A Price Reduction Is Not Always the Best Negotiation

This is where I think a lot of buyers miss opportunities.

Let’s say a house is listed for:

$500,000.

We discover the seller has some flexibility and is willing to give up $10,000 to make the deal happen.

You might immediately think:

“Offer $490,000.”

Maybe.

But that’s not automatically the best use of that $10,000.

We could potentially explore:

Option A: $490,000 purchase price with no concession.

Or:

Option B: $500,000 purchase price with a $10,000 seller concession.

Which one is better?

It depends on YOU.

If you’ve got plenty of cash but care primarily about the lowest possible purchase price, maybe the price reduction makes more sense.

But imagine you’re a first-time buyer who is comfortable with the payment but wants to preserve cash.

That $10,000 concession may potentially cover a significant portion of your closing costs.

Now instead of saving a relatively small amount each month from the lower loan balance, you’ve potentially kept $10,000 in your bank account immediately.

Or perhaps we use part of the concession toward eligible discount points to improve the interest rate.

The CFPB specifically notes that seller credits can reduce the amount of cash a buyer needs at closing.

That’s why my job isn’t simply:

“Troy got $10,000 off the house.”

I want to ask:

“What does $10,000 of negotiating power actually do for my buyer?”

That’s a better conversation.

Sometimes We Can Use Seller Concessions to Buy Down Your Interest Rate

Here’s another strategy first-time buyers should know exists.

Depending on your loan and lender, seller concessions may sometimes be used toward discount points or another permitted interest-rate buydown structure.

Discount points are an upfront cost paid to the lender in exchange for a lower interest rate.

So instead of asking the seller for:

$10,000 off the purchase price,

there may be situations where we ask:

What if the seller contributes $10,000 and my lender uses some of that toward reducing my interest rate?

Now we’re talking about potentially affecting your monthly payment.

Is that always the best option?

No.

That’s why I want the lender doing the math.

I might ask them:

“Show my buyer what this payment looks like with the price reduction versus using the same seller money toward closing costs or an interest-rate strategy.”

Then you can make an informed decision.

Where Do I Find the Leverage to Negotiate Concessions?

Now we get to my side of the transaction.

I can’t magically force a seller to give you money.

And I will never promise that every seller is going to agree to concessions.

But I can look for leverage.

I’m paying attention to things like:

How long has the home been on the market?

A seller who listed yesterday with five offers may have very little motivation to give us $15,000.

A seller whose home has been sitting for 60 days?

Different conversation.

Has the price already been reduced?

Price reductions can tell us something about seller expectations and motivation.

Did another contract fall apart?

If a property has already gone under contract and returned to the market, I want to understand why.

Is the home vacant?

Sometimes a seller is carrying a mortgage, taxes, insurance, HOA dues, utilities, and maintenance on an empty property.

Time can become expensive.

What did our inspection uncover?

Maybe the house needs legitimate repairs.

Rather than having the seller coordinate every repair themselves, we may be able to negotiate a seller credit where permitted and appropriate.

CFPB specifically recognizes that buyers and sellers may sometimes negotiate credits instead of having the seller complete repairs before closing.

What does the seller actually care about?

Price isn’t the only term in an offer.

Closing date.

Possession.

Financing strength.

Contingencies.

Certainty.

Convenience.

Every seller is different.

And the better I understand what they want, the better chance I have of structuring something where both sides get something they value.

Sometimes the Best Concessions Are Negotiated Before Inspection

A lot of buyers assume concessions only happen because something is wrong with the house.

Not necessarily.

We can negotiate them directly in the original offer.

Maybe the property is listed for $500,000.

Based on the market, comparable sales, seller motivation, and how much closing-cost assistance you need, perhaps I structure an offer that says:

Purchase Price: $500,000
Seller Concession: $12,000

Now that’s part of our offer from the beginning.

The seller can accept it.

Reject it.

Counter it.

Or negotiate another structure.

The important part is that we’re thinking about your entire transaction, not simply the number at the top of the purchase contract.

But Seller Concessions Aren’t Free Money

This is important.

I don’t want somebody reading this and thinking:

“Troy can just get every seller to pay all my closing costs.”

No.

The seller is looking at their net proceeds.

If we’re offering $500,000 with a $15,000 concession, the seller is going to consider that concession when evaluating what they actually receive.

And sometimes the seller may agree to a higher purchase price in exchange for providing a credit.

CFPB points out that buyers should understand this tradeoff: when a seller contributes toward closing costs, the seller may want a higher price, and the home still needs to support the agreed value.

Remember our appraisal article?

This is where these concepts connect.

We cannot just inflate the purchase price indefinitely to manufacture concessions.

The house still has to make sense.

This Is Why I Want the Lender and Realtor Working Together

Seller concessions are one of those areas where your Realtor and lender need to communicate.

Before we write an offer, I may call your lender and ask:

How much does this buyer have in estimated closing costs?

What’s the maximum concession allowed under this loan?

Would additional seller credit actually be usable?

Could part of it be used toward discount points?

What would the payment look like under different options?

Then I take that information into the negotiation.

That’s a much stronger strategy than blindly writing:

“Seller to pay $20,000.”

I want to know exactly what we’re asking for and why.

How I Think About Negotiating for My Buyers

Here’s what I want my first-time buyers to understand about working with me:

I’m trying to win on more than one line of the contract.

Of course I care about purchase price.

But I’m also thinking about:

How much cash are you bringing to closing?

Can I negotiate seller concessions?

Can we get repairs addressed?

Can we improve the financing economics?

Can we preserve more of your savings?

What terms can I negotiate without unnecessarily weakening your offer?

Sometimes a great deal is getting the house $20,000 below asking.

Sometimes it’s paying close to asking but getting $15,000 toward your costs.

Sometimes it’s negotiating repairs plus concessions.

Every deal is different.

That’s why I don’t want to be the Realtor who just says:

“What number do you want to offer?”

I want to understand what outcome actually matters to you.

Then we build the offer around it.

The Bottom Line on Seller Concessions

Yes — sellers can potentially contribute toward a buyer’s closing costs.

Those contributions are commonly called seller concessions or seller credits.

Depending on your loan and lender, they may be used toward eligible expenses such as:

• closing costs
• prepaid expenses
• certain lender fees
• discount points
• permitted interest-rate buydowns

There are limits based on your mortgage program, and concessions generally cannot simply be handed to you as cash or substituted for your required down payment.

But used strategically?

Seller concessions can potentially save a first-time buyer thousands of dollars out of pocket at closing.

And that’s why when I’m negotiating your first home, I’m not only thinking:

“How low can I get the price?”

I’m thinking:

“How much total value can I negotiate for my buyer?”

Because my job isn’t simply to help you buy the house.

I want to help you buy it on the best terms we can reasonably negotiate.

Buying Your First Home in the Denver Metro?

If you’re preparing to buy your first home in Aurora, Lakewood, Parker, Centennial, Highlands Ranch, or elsewhere throughout the Denver metro, download my FREE Home Buying Roadmap.

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And when you’re ready to start your search, schedule a Residential Buyer Consultation with me.

We’ll talk about your goals, financing, cash available, monthly comfort level, and what a successful purchase actually looks like for you.

Then when it’s time to write an offer?

We’re not just negotiating the house.

We’re negotiating the deal.

Seller concessions are subject to lender, loan-program, appraisal, underwriting, contract, and transaction requirements. Allowable amounts and uses vary. Buyers should confirm their specific financing requirements with their mortgage lender.