When a seller agrees to give you $10,000, you can take it as a lower purchase price or as a concession toward your closing costs. Most buyers instinctively reach for the lower price. On a $500,000 home at a rate near 6.5 percent, that instinct usually costs you money, because a lower price trickles back to you at about $50 a month while a concession hands you thousands in cash the day you close.
The $10,000 lower price, in real numbers
Say you are buying a $500,000 home and putting 20 percent down. Your loan is $400,000, and at 6.5 percent on a 30 year fixed, your principal and interest payment is about $2,528 a month.
Now negotiate the price down to $490,000. Keeping the same 20 percent down, your loan drops to $392,000 and your payment falls to about $2,478. That is a savings of roughly $50 a month.
Fifty dollars a month is real, but it is slow. It adds up to about $600 a year. To recover the full $10,000 through those monthly savings alone, you would need to keep this exact loan for more than a decade. Most people move or refinance long before that.
The $10,000 concession, in real numbers
Closing costs on a $500,000 purchase typically run 2 to 3 percent of the price, which lands somewhere around $10,000 to $15,000 once you include lender fees, title work, and the taxes and insurance you prepay at closing.
A $10,000 seller concession is applied directly against those costs. Instead of writing a check for all of it, the seller covers most or all of it for you. That is $10,000 you keep in your bank account on closing day, not fifty dollars at a time spread across the next decade.
The part that matters most: cash to close
Here is where the two choices really separate. For most buyers, the biggest obstacle is not the monthly payment, it is having enough cash to reach the closing table at all.
A lower price barely helps with that. Dropping from $500,000 to $490,000 at 20 percent down reduces your down payment by just $2,000, from $100,000 to $98,000. Your closing costs stay almost exactly the same. So a $10,000 price cut only reduces the cash you need at closing by about $2,000.
A $10,000 concession reduces your cash to close by the full $10,000, dollar for dollar. Same house, same down payment, same monthly payment, but you bring roughly $8,000 less to closing than you would have with the price cut. For a buyer watching every dollar of their savings, that is the difference that actually matters.
Put simply: the lower price saves you about $50 a month, starting later. The concession saves you thousands of dollars right now. Unless you are certain you will keep this exact loan for well over a decade, the cash today is worth more.
Why the seller usually does not mind
Sellers care about their net proceeds, and in most cases the two options net them nearly the same amount. A $490,000 sale nets the seller $490,000. A $500,000 sale with a $10,000 concession also nets them $490,000.
There is even a reason a seller might prefer the concession: the home records as a $500,000 sale, which supports the comparable values in the neighborhood better than a $490,000 sale would. That makes the concession an easy ask, and a good listing agent knows it.
The limits and the fine print
- Concessions are capped by your loan type and how you plan to use the home. On a primary residence, conventional and FHA loans generally leave enough room that a $10,000 concession on a $500,000 purchase, which is only 2 percent, fits comfortably under the limit.
- You cannot pocket unused concession as cash back. If your total closing costs come to $6,000, a $10,000 concession only helps you by $6,000 unless you redirect the rest toward prepaying taxes and insurance or buying down your rate.
- A concession can fund a rate buydown. If your closing costs are already covered, that same seller money can lower your interest rate, temporarily or permanently, which can beat the monthly savings a price cut would have given you.
When a lower price is the better move
To be fair, the price cut is not always the wrong call:
- If you have plenty of cash and you are confident you will keep the loan for fifteen years or more, the lower loan balance saves you more in lifetime interest.
- If a lower price drops you under a loan limit or a pricing threshold, the better rate that unlocks can be worth more than the concession.
- If your actual closing costs are small, a price cut captures value that a concession would waste, since you cannot take unused concession in cash.
Frequently asked questions
Essentially yes. A concession is money the seller agrees to credit toward your closing costs and prepaid items, which lowers the cash you bring to closing. It is negotiated as part of your offer.
It depends on your loan program, your down payment, and whether the home is your primary residence. On most primary residence loans there is comfortable room for a concession of a few percent of the price. On a $500,000 home, $10,000 is only 2 percent, which fits within the limits of nearly every program.
You cannot take the leftover as cash. But you can usually apply it to prepaid taxes and insurance or use it to buy down your interest rate, so the money is rarely wasted when the offer is structured well.
Thinking about how to structure your next offer? Send me the price and your loan program, and I will show you exactly how a concession compares to a lower price for your numbers.
This article is general education, not a commitment to lend or an offer of credit. Program availability, terms, rates, and qualification guidelines vary by lender and are subject to change; all loans are subject to underwriting and final approval. Market figures are approximate and change over time. For guidance specific to your situation, reach out directly. Garrett Potz, NMLS #631592 · Affinity Home Lending, Company NMLS #1181151 · Equal Housing Lender.