AZ Go-To Girl Blog · Buying & Selling in Phoenix
Destyn, overlooking the Phoenix skyline from Midtown
Quick Answer
For a lot of buyers, yes. With mortgage rates having climbed from the mid-6% range to nearly the high 7s, a seller concession used to fund a temporary rate buydown can lower a monthly payment far more than an equivalent price cut. A $10,000 price reduction typically saves a buyer about $50 a month, while that same $10,000 put toward a 2-1 buydown can save $400 to $500 a month in year one and $200 to $250 in year two. Concessions can also simply cover closing costs or discount points. How much a seller can contribute depends on loan type, roughly 3% to 9% of the price on a conventional loan depending on down payment, up to 6% on FHA, and nearly all allowable closing costs on a VA loan. If a buyer refinances before a temporary buydown period ends, any money left in the buydown escrow account is applied to reduce the loan's principal balance, not refunded as cash.
Nearly every buyer I've worked with over the last year has walked away from closing with some kind of seller concession in their corner, whether they knew to ask for it going in or not. Some used it to cover their closing costs outright. Others took that same credit and put it toward buying down their interest rate instead, which, depending on how it's structured, can do a lot more for their monthly payment than most people expect. If there is one negotiation tool I bring up in nearly every buyer consultation right now, it's this one.
A seller concession is simply money the seller agrees to put toward your costs at closing. It never gets handed to you directly. It shows up as a credit on your closing statement, reducing what you have to bring to the table. The three places I see it used most are closing costs, things like lender fees, title insurance, and prepaid taxes and insurance, discount points to permanently lower your rate, and temporary rate buydowns, most commonly a 2-1 buydown, where your rate is reduced for the first year, a little less the second year, then settles at the real note rate starting year three.
Here is why this matters so much right now. Mortgage rates have climbed from the mid-6% range to nearly the high 7s, and that is the single biggest thing keeping buyers out of homes they can otherwise afford on paper. Sellers have caught on. Nationally, close to 45% of sellers are offering some form of concession right now, and in some markets that number is closer to 70%. It has become a normal part of how deals get done, not a sign that something is wrong with the house or that the seller is desperate.
How much a seller can actually contribute depends on your loan type and your down payment. On a conventional loan, it typically ranges from 3% of the price if you're putting down less than 10%, up to 6% with a down payment of 10% or more, and 9% if you're putting 25% or more down. FHA loans cap it at 6% of the purchase price. VA loans let the seller cover nearly all of your normal, allowable closing costs. One rule that trips people up: concessions can only go toward actual closing costs, not your down payment, and the credit cannot exceed what you actually owe at closing. If your real closing costs come in lower than the concession that was negotiated, the extra does not come back to you as cash. It just gets reduced to match.
Here is the part that actually makes this the golden ticket. A $10,000 price reduction on a home only lowers your monthly payment by around $50. That same $10,000 used to fund a temporary 2-1 buydown can lower your payment by $400 to $500 in year one and $200 to $250 in year two. For a buyer who is qualifying on the edge or just trying to ease into a higher payment while their income catches up, that difference can be the thing that actually gets them into the home, not a lower sticker price that barely moves the needle.
I had a buyer recently who was tight on both her down payment and her closing cost funds, and she was convinced that tightness meant crossing certain price points off her list entirely. Instead of narrowing her search, we ran the real math and started touring homes that had already been sitting on the market 60 days or more, properties where a seller is far more open to negotiating. We found one priced just above what she had originally told me was her ceiling, and because that seller was willing to pay concessions, she was still able to meet her down payment obligation and clear the threshold her lender needed for prequalification.
Here's a detail that catches almost every buyer off guard: even with a 2-1 buydown, you are not qualified based on the lower, bought-down payment. Lenders require you to qualify at the full note rate, the real rate you'll be paying once the buydown period ends, specifically so you're not approved for a payment you can't actually sustain long term. The buydown lowers what you pay in years one and two. It does not lower what you have to prove you can afford to get the loan in the first place.
On that deal, I negotiated for the highest amount the seller was allowed to contribute under her loan guidelines, and we split it two ways. Part went toward the 2-1 buydown itself, and the remainder covered the rest of her closing costs: escrow fees, prepaid interest, HOA transfer and dues, homeowners insurance, and title fees. Stacking it that way is what actually got her to the closing table instead of staying priced out of that neighborhood.
That's the pattern I see over and over. Nearly all of my buyers this past year have benefited from some version of this negotiation, and most of them didn't know it was even on the table until we ran the numbers together.
One more detail I make sure every buyer using a temporary buydown understands going in: that money does not just disappear if you refinance before the two years are up. The buydown funds sit in an escrow impound account held by your loan servicer, and they get released a little at a time to subsidize your lower payment each month. If you refinance or pay off the loan early and there is still a balance sitting in that account, it does not get mailed back to you as a check. It gets applied directly to your principal balance, lowering what you actually owe at payoff. You do not lose it, but do not plan on seeing it show up as cash in hand either.
If you're on the seller side reading this, a concession is not the same as leaving money on the table. It is often a sharper tool than a straight price cut, because the buyer feels a bigger benefit from the same dollar amount, which can be the difference between an offer that works for both sides and one that falls apart over a few hundred dollars a month. I walk my sellers through both options side by side before we ever counter an offer, because the number that looks smaller on paper sometimes gets you to closing faster than the one that looks bigger.
I need to say plainly that I am not a lender, and the exact numbers on any buydown or concession depend on your specific loan program, your lender's guidelines, and the deal in front of you. What I do is make sure concessions are part of the conversation from the very start, whether you're buying or selling, and loop in a trusted lender to run your real numbers before we write or accept an offer.
If rates are the thing standing between you and a home that otherwise works on paper, this is the conversation worth having before you assume you can't afford it.
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