Are you hearing more about seller concessions and wondering how they could help you buy or sell in Peoria? With rates and affordability top of mind, these credits can bridge the gap for buyers and help sellers secure stronger offers. You want clear, local answers without the jargon. In this guide, you’ll learn what concessions can pay for, the caps by loan type, how they change the numbers, and how to negotiate them in Peoria. Let’s dive in.
What seller concessions cover
Seller concessions are credits a seller gives the buyer at closing. They reduce the buyer’s cash needed to close and come right off the seller’s net proceeds.
Common items concessions can pay for:
- Buyer closing costs (lender, title, and escrow fees)
- Prepaid items (property tax proration, homeowners insurance, prepaid interest)
- Discount points to lower the buyer’s interest rate
- Temporary rate buydowns (like a 2-1 buydown)
- HOA transfer or disclosure fees, reserves, or short-term assessments if permitted
- Inspection-related credits in lieu of repairs
- A home warranty
These credits are documented in your purchase contract and shown on the final closing statement. Lenders enforce program caps, and credits cannot exceed actual allowable costs.
Program caps by loan type
Loan program rules set maximum concession amounts. Local customs do not override these limits, so you should confirm with the buyer’s lender before you write or accept an offer.
- Conventional (primary residence)
- Less than 10% down: up to 3% of the purchase price
- 10%–25% down: up to 6%
- 25% or more down: up to 9%
- FHA
- Up to 6% of the purchase price
- VA
- Generally up to 4% of the sales price for financing concessions, plus certain seller-paid costs as allowed
- USDA
- Commonly up to 6% (confirm with the USDA lender)
Lenders may apply stricter overlays. If a credit is too large for the program, the lender may reduce the qualifying price or deny the loan.
How concessions change the numbers
Concessions shift who pays certain costs but do not change the loan principal unless used to buy discount points. Here is how they affect each side:
- Seller net proceeds: Decrease dollar-for-dollar by the amount of the concession.
- Buyer cash to close: Decreases because the seller pays some costs.
- Monthly payment: Only changes if the concession funds buy discount points or a temporary buydown.
Example: FHA at $350,000
- Purchase price: $350,000
- FHA cap: 6% = $21,000
- Buyer down payment: 3.5% = $12,250
- Loan amount: $337,750
- Use of credit: Seller pays up to $21,000 of closing costs and prepaids
Results:
- Buyer brings less cash at closing, often limited to the down payment and any ineligible items
- Seller net is reduced by the $21,000 credit
- Monthly payment stays based on the $337,750 loan amount unless some of the credit buys discount points
Example: Conventional at 5% down
- Purchase price: $350,000
- 5% down means the cap is 3% = $10,500
- Buyer down payment: $17,500
- Loan amount: $332,500
Option 1: Apply the $10,500 to closing costs. The buyer’s cash to close drops, but the payment stays the same.
Option 2: Use the $10,500 for discount points. If roughly 1 point equals 1% of the loan (about $3,325 here), the credit could buy around 3.16 points and may lower the rate about 0.5% to 0.75% depending on pricing. For example only, if the rate moves from 6.00% to 5.25%, principal and interest could drop from about $1,993 to about $1,831 per month, a savings of around $160. Exact pricing varies by lender and day.
Example: VA with 4% cap
- Purchase price: $350,000
- Concession cap: about 4% = $14,000
- Use of credit: Seller pays allowable fees, discount points, or a buydown
Results are similar to FHA. The veteran’s cash to close drops, the seller’s net falls by the credit amount, and the monthly payment only changes if the credit funds a rate reduction or buydown.
Key takeaways at $350,000
- 3% credit = $10,500
- 4% credit = $14,000
- 6% credit = $21,000
Credits reduce the seller’s proceeds and the buyer’s cash to close. They only lower the monthly payment if used for discount points or a buydown.
Peoria strategies that work
In Peoria and across Maricopa County, concessions are common in shifting markets or when a home needs updates. Arizona does not have a state real estate transfer tax, which can help both sides focus on targeted credits rather than replacing a transfer tax line item.
For sellers in Peoria
- Know your net. Estimate your proceeds with the concession number, your mortgage payoff, commissions, and fees. A credit is a dollar-for-dollar reduction.
- Compare a price cut vs. a credit. A well-placed credit can be more valuable to a buyer than a price reduction, especially if it buys down the rate. Watch for appraisal risk if you raise price to cover a credit.
- Target the obstacle. If buyers need help with closing costs, offer a set amount. If qualifying is tight, consider funding a temporary buydown or points.
- Document clearly. Spell out a flat dollar amount and intended use in the contract and escrow instructions to avoid delays.
For buyers in Peoria
- Ask your lender first. Get a pre-approval and the exact concession cap for your loan type before you write.
- Be specific in your offer. State a dollar amount and how you plan to use it. That clarity builds trust and speeds underwriting.
- Think beyond closing costs. A seller-funded buydown or points can lower your monthly payment and may help with debt-to-income ratios.
- Watch the appraisal. If the price rises to offset a credit and the appraisal comes in short, be ready to renegotiate or bring cash.
Title, HOA, and escrow notes
- HOA fees: Many Peoria homes are in HOAs. You can negotiate who pays transfer fees, disclosure packages, and any short-term assessments. Confirm what your loan allows before allocating the credit.
- Inspection credits: If repairs are needed, a credit in lieu of repairs can keep the timeline on track and satisfy lender rules when handled properly through escrow.
- Paperwork: Your lender and title/escrow officer will show the credit on the Loan Estimate and Closing Disclosure. Accurate language in the contract helps the file clear underwriting.
Common pitfalls to avoid
- Exceeding program caps. A credit that is too large for the loan program will be cut back or force a price change.
- Inflating price to cover credits without support. If the appraisal does not match the new price, you risk a gap that needs cash or a renegotiation.
- Requesting credits for ineligible items. Credits cannot give buyers “extra” cash beyond allowable costs. Keep uses within program rules.
- Vague contract terms. Fuzzy language can slow down underwriting and closing. Be precise.
Plain-English glossary
- Seller concessions: Money the seller pays toward the buyer’s allowed costs at closing.
- Closing costs: Lender, title, escrow, and recording fees due at closing.
- Prepaids: Upfront items like the first year of homeowners insurance, property tax proration, and prepaid interest.
- Discount points: Upfront fees, usually 1% of the loan per point, paid to reduce the interest rate.
- Buydown: Money paid to lower the interest rate temporarily or for the life of the loan.
- LTV (loan-to-value): Loan amount divided by the price or appraised value.
- Appraisal: A lender-ordered estimate of market value.
- Net proceeds: A seller’s cash after price minus payoff, commissions, concessions, and fees.
- Escrow: The neutral third party that handles funds and documents at closing in Arizona.
- Concession cap: The maximum credit a seller can give, set by the loan program.
Final thoughts and next step
Seller concessions are a powerful tool in Peoria when you use them smartly. They can solve cash-to-close hurdles, improve loan qualification, and keep your timeline moving. The key is aligning the credit with the loan program, the appraisal, and your goals so everyone reaches a clean, confident closing.
If you want a custom plan for your Peoria sale or purchase, reach out to Elizabeth Chionchio for a friendly, data-backed consultation that fits your timeline and budget.
FAQs
What are seller concessions in Arizona?
- Seller concessions are credits a seller pays at closing to cover a buyer’s allowable costs, like closing fees, prepaids, and possibly discount points or a buydown.
How much can a seller pay in Peoria?
- Caps depend on the loan: roughly 3% to 9% for conventional (based on down payment), up to 6% for FHA, about 4% for VA, and commonly up to 6% for USDA.
Do concessions lower my monthly payment?
- Only if used for discount points or a temporary buydown; paying standard closing costs does not change your principal and interest payment.
Are HOA fees covered by concessions?
- Often yes if the loan program allows; you can negotiate HOA transfer or disclosure fees and short-term assessments within the program’s cap.
Is there a transfer tax in Arizona?
- Arizona does not have a state real estate transfer tax, though normal closing fees still apply and vary by transaction.
Do concessions affect appraisal or LTV?
- Concessions do not raise appraised value, and if price is increased to cover a credit, a low appraisal can create a gap that requires cash or a renegotiation.
