What Are Seller Concessions and Incentives in Real Estate?

by Elizabeth S. SW-Florida Realtor

What Are Concessions and Incentives in Real Estate?

When buying a home, it’s not uncommon to come across terms like ‘concessions’ and ‘incentives.’ These are valuable tools used by sellers and builders to make a property more appealing and to help buyers manage costs. Let’s break down what they mean and why they matter in today’s real estate market.

Concessions vs. Incentives: What’s the Difference?

When a seller or builder gives you something extra to help with your purchase, that’s called either a concession or an incentive. Though they may seem similar, they serve slightly different purposes.

Concession: This is something a seller gives up or agrees to reach a compromise and close a deal. Concessions are often negotiated during the buying process and can include covering closing costs or making repairs to the property.
Incentive: This is a benefit that a builder or seller advertises and offers upfront to attract and encourage buyers. Builders often use incentives to make their new construction properties more appealing, such as providing upgrades or temporarily lowering mortgage rates.

Common Concessions and Incentives

Today, some of the most common types of concessions and incentives are:

Help with closing costs
Mortgage rate buy-downs (to temporarily lower your rate)
Discounts or price reductions
Upgrades or new appliances
Home warranties
Minor repairs

For buyers, obtaining any of these can be a significant challenge, especially when working within a tight budget. As the National Association of Realtors (NAR) states:

“. . . they can help reduce the upfront costs associated with purchasing a home.”

Why Builders Are Offering More Incentives Now

It’s not just one builder tossing in extras – it’s an industry trend. Recently, builders have been more inclined to offer incentives to keep inventory moving. Builders offered incentives on 56% of to-be-built homes and 74% of quick move-in (QMI) homes, which are typically available for occupancy within 90 days.

The reason? Builders don’t want to sit on unsold inventory. As the National Association of Home Builders (NAHB) notes, one common strategy to maintain sales momentum is price adjustment.

First-Time Home Buyer Advantage

One of the most attractive aspects of today’s market is that first-time home buyer programs, combined with seller incentives, can often result in little to no money coming out of the buyer’s pocket at closing. This unique combination makes homeownership more accessible for those looking to purchase their first property.

Final Thoughts

If you’re a buyer, understanding the difference between concessions and incentives can help you leverage these offers to your advantage. Always work closely with your real estate agent to identify the best opportunities and ensure you’re making a wise financial decision.