Seller concession

Key Takeaways

• A seller concession is a credit the seller gives the buyer at closing, paid out of the seller's sale proceeds rather than as a separate check to the buyer.
• A concession lowers the buyer's cash to close but does not lower the contract price, so the loan amount and the appraised value still have to work at the full price.
• Since the August 2024 practice changes, offers of compensation to a buyer's broker cannot be published on an MLS, which is why a seller concession negotiated in the offer is now a common way that fee gets funded.
• A seller who pays a buyer's broker does not become that broker's client. RCW 18.86.080 states that an agreement to pay or payment of compensation does not establish an agency relationship.

What It Means

A seller concession is money the property's owner agrees to credit the buyer at closing. It is not a separate payment between the parties. The credit is written into the purchase and sale agreement or an addendum, and the closing agent takes it out of the seller's proceeds and applies it against what the buyer owes, so it appears as a debit to the seller and a credit to the buyer on the settlement statement.

Buyers ask for concessions for three reasons. To cover Closing Costs and prepaid items, when the buyer has the down payment but is short on cash. To resolve repairs found during inspection, where a credit is faster and cleaner than sending the seller to hire a contractor. And, since the 2024 Nar Settlement practice changes, to fund the buyer's broker fee, which is now negotiated in the transaction rather than advertised through the MLS.

The important structural point is what a concession does not touch. It changes the buyer's Cash To Close and the seller's Net Proceeds. It does not change the contract price the loan and the appraisal are measured against.

How It Works in Washington

In Washington, the statute that makes a seller-funded buyer-broker concession workable is RCW 18.86.080. It provides that a firm's compensation "may be paid by the seller, the buyer, a third party, or by sharing" it between firms, that "a firm may be compensated by more than one party for real estate brokerage services in a real estate transaction," and, most importantly for the exam, that "an agreement to pay or payment of compensation does not establish an agency relationship between the party who paid the compensation and the broker." A Washington seller who funds the buyer's broker fee is paying, not hiring, and that broker still owes the buyer the duties set out in RCW 18.86.050.

The amount comes from the buyer's own paperwork rather than from the listing. RCW 18.86.020 requires the firm to enter a services agreement with its principal, and when the principal is a buyer that agreement carries a default term of 60 days unless the parties choose a longer one. The buyer's broker then writes the concession the buyer wants into the offer as a dollar figure or a stated percentage of the price, and the seller accepts, counters, or rejects it like any other term.

Example

Ken lists a house in Olympia at $610,000. Alina offers full price with a $12,000 seller concession: $8,000 toward her closing costs and prepaid items, and $4,000 toward the buyer-broker fee her services agreement sets at $4,000. Alina is putting 20 percent down.

At closing, escrow debits Ken $12,000 and credits Alina $12,000. Ken's gross is $610,000 less the $12,000 credit, so he is working from $598,000 before his own costs and loan payoff. Alina's down payment is 20 percent of $610,000, which is $122,000, and her loan is $488,000. The $12,000 credit is applied against her closing costs and broker fee, so she brings her $122,000 plus only the amount by which her costs exceed $12,000.

Compare the alternative. Had Alina simply offered $598,000 with no concession, Ken's gross would be the same $598,000. Alina's down payment would drop to $119,600 and her loan to $478,400, saving her $2,400 of down payment, but she would lose the whole $12,000 credit. That is $9,600 more of her own cash on closing day for the same result to the seller.

Common Mistakes and Exam Traps

• A concession does not reduce the sale price. The recorded price, the excise tax, and the value the appraisal must support all work from the contract price, not the price minus the credit.
• Seller concession and price reduction are not interchangeable answers. A concession keeps the loan amount at the higher price while lowering the buyer's cash at the table.
• A concession is a credit against what the buyer owes, not cash handed to the buyer. It cannot exceed the amounts charged to the buyer on the settlement statement.
• Paying a buyer's broker does not create agency with the payer. RCW 18.86.080 says so directly, and the answer that turns the seller into the buyer's broker's client is the trap.