What Is a Seller Assist When Buying a House?

It’s important to note that lenders have specific limits on the amount of seller assistance or concessions that can be included in a transaction, which can vary based on the type of loan and the down payment percentage. (See our “Seller limits” section below.) The agreement for a seller assist must be included in the purchase contract and approved by the lender.

Seller assist example

Imagine you’re buying a home priced at $350,000, and you have negotiated a 3% seller assist with the seller. This means the seller has agreed to contribute $10,500 toward your closing costs. Instead of needing to come up with $13,000 for closing costs on your own, you would now only need to provide $2,500.

This reduction in upfront costs can make a significant difference in your ability to afford the home, especially in markets where saving for both a down payment and closing costs can be a daunting challenge. This example illustrates how a seller assist can provide financial relief, making homeownership more accessible.

Seller assist limits

While seller assists can be a valuable tool for buyers to reduce their upfront costs, it’s important to understand that there are caps in place for these contributions, which vary by loan type. These limits are designed to ensure that the seller contributions do not adversely affect the loan’s integrity or the home’s market value. Typically, the lesser of the sale price or the appraised value dictates the maximum amount a seller can contribute to assist the buyer.

For instance, if you offer $255,000 for a home that appraises for $250,000, and the seller assist limit is 3%, the seller can contribute up to 3% of $250,000 — equating to $7,500 — toward your closing costs.

Here’s a breakdown of seller assist limits for some common loan types:

• Conventional loans: The contribution limit on a conventional loan depends on your down payment amount.
  • Less than 10% down payment: up to 3% seller contribution.
  • 10% to 25% down payment: up to 6% seller contribution.
  • More than 25% down payment: up to 9% seller contribution.
  • For investment properties, the limit is 2%, regardless of the down payment.
• FHA loans: For Federal Housing Administration loans, the seller can contribute up to 6% of the purchase price. These contributions can cover closing costs, appraisal fees, and other related expenses.
• USDA loans: U.S. Department of Agriculture loans allow the seller to contribute up to 6% of the buyer’s loan amount, which is unique in that it’s not based on the home’s price or appraised value.
• VA loans: Department of Veterans Affairs loans permit a seller contribution of up to 4% of the purchase price. Concessions here may also include payments toward the buyer’s debts and VA funding fees, offering a broader application than typical closing costs.

Who most needs a seller assist?

Seller assists are particularly beneficial for buyers who might struggle with the upfront costs of purchasing a home. This includes:

• First-time homebuyers: Often operating within tight budgets, these buyers may find saving for both a down payment and closing costs challenging.
• Buyers with limited cash reserves: Those who can afford monthly mortgage payments but have limited savings for initial costs.
• Buyers in high-cost markets: In areas where real estate prices are steep, closing costs can be prohibitive, making seller assists a valuable aid.
• Buyers purchasing fixer-uppers: Those planning to invest in renovations may prefer to allocate more of their budget to improvements rather than closing costs.

Why would a seller assist you with costs?

Sellers might agree to assist with costs for several reasons:

• To facilitate a faster sale: Offering a seller assist can make the property more appealing, especially in competitive or slow markets.
• To help close the gap in negotiation: If a buyer’s offer is slightly lower than the asking price but includes a request for seller assist, the seller might find this compromise acceptable to proceed with the sale.
• To support buyers in affording the home: Sellers who are motivated by reasons other than just profit, such as helping a young family get their start, might be more inclined to offer assistance.

Pros and cons of seller assist

Tax implications of seller assist

In most cases, as a buyer, you won’t face any negative tax implications if you accept a seller assist. Depending on the concession, you may actually be eligible for a tax deduction. For example, while most closing costs are not tax deductible, the IRS does allow you to deduct mortgage interest, which includes discount points — even if they are paid by the seller as a seller assist to lower your interest rate.

Whenever you buy or sell a home, it’s wise to consult with a tax professional to review available real estate-related tax deductions.

Alternatives to a seller assist

If a seller assist or concession doesn’t seem feasible or the best option for your situation, there are several alternatives to consider that can also help manage the upfront costs of buying a home:

• Lender credits: Similar to a seller assist, lender credits involve the lender agreeing to cover part of your closing costs in exchange for a slightly higher interest rate on your loan.
• Gift funds: Family members can often provide gifts to cover part or all of your down payment and closing costs. Lenders usually require a gift letter to ensure the funds are not a loan.
• Down payment assistance programs: Many state and local governments offer programs to help first-time and low-income buyers with their down payments and closing costs.
• Negotiating closing costs directly: You can also try to negotiate with your lender or other service providers for reduced fees or to waive certain costs.

Is a seller assist a good option for me?

Deciding whether to request a seller assist depends on your financial situation, the real estate market you’re buying in, and the willingness of the seller. Here are a few considerations to help you decide:

• Your cash availability for closing: If coming up with enough money for closing costs is a challenge, a seller assist can be a valuable aid.
• Market conditions: In a buyer’s market, sellers may be more willing to agree to a seller assist to close the deal.
• The property’s appeal: If a property has been on the market for a while, the seller might be more open to the idea of a seller assist.

Remember, negotiating a seller assist into your home purchase agreement can be complex, and it’s important to approach it with a clear understanding of how it affects the deal for both you and the seller.

Are you considering buying a home and wondering if a seller assist could be the right strategy for you? Let HomeLight connect you with a top-rated real estate agent in your market who can provide expert advice and guidance. A skilled agent can help you navigate the negotiation process, ensuring that you make the best decision for your unique situation.

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