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How Much Can a Seller Pay Toward Closing Costs?

It's important for both sellers and buyers to understand their respective closing costs, and where there might be wiggle room to negotiate.

One way to make a sale more attractive to buyers is to offer seller concessions, which are essentially closing costs that the seller agrees to pay on behalf of the buyer. These concessions can make a home more affordable for the buyer, and they can facilitate a successful closing.

The amount of seller concessions can vary based on a few factors:

  • Seller vs. Buyer Market: One of the most significant factors is the current real estate market. If it's a buyer's market, you may need to offer a larger concession to make your property more competitive. Conversely, if it's a seller's market, you may be able to offer a smaller concession, or none at all.

  • Financing: If the buyer is obtaining a mortgage, their lender may have limits on how much of the closing costs they can cover. For example, if the buyer is using an FHA loan, then the seller may only contribute up to 6% of the purchase price. If the buyer is financing the purchase of a primary or secondary home with a conventional loan, then the limit may be as high as 9%, depending on the lender.

Chart of seller concessions allowed in a financed transaction, home sale
Source: Highland's Residential Mortgage (2023)

Generally speaking, seller concessions typically range between 3-6% of the purchase price. This means that if the sale price of a residence is $900,000, the seller may contribute around $27,000 and $54,000 in closing costs, and as high as $81,000 in some cases.

The actual amount of the concession will vary based on the specifics of the transaction and parties involved.

By offering to cover some of the closing costs, the seller can make the purchase of the home more affordable for the buyer. This can be a powerful negotiating tool, especially in a competitive real estate market like Miami. A seller concession can help attract more buyers and help the seller get the best possible price for their property.

It's important to note that seller concessions impact the seller's net proceeds from the sale, as closing costs will be deducted from the seller's proceeds at closing.

Takeaway: Seller concessions can be a powerful tool in a Miami real estate transaction. By offering to cover some or all of the closing costs, the seller can make the home more affordable for the buyer and help close the deal. If you're considering offering a seller concession, it's important to work with a knowledgeable lender and real estate agent who can help you navigate the process and ensure a successful sale.


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