What the seller pays

Overview

Seven instruments, not seven words for one thing

It helps to have the definitions side by side, because the vocabulary in this corner of a transaction is genuinely overloaded.

• A seller credit is a sum the seller agrees at closing to apply against costs that would otherwise be yours. It is recorded on the closing paperwork rather than handed over as cash.
• A seller concession is the lender's category name for the same money. The distinction matters because the ceilings live on the lender's side of the vocabulary, not the contract's.
• Seller-paid closing costs is the contract line item that carries a credit. It is the same lender object as a seller credit with a different reader-facing name, and it is the only vehicle most lenders will let the money travel in, since a lender will not approve cash moving from seller to buyer but will approve a reduction in what the buyer has to bring.
• An escrow holdback is money withheld at closing and released when named work is finished. Whether it is available at all is a lender decision rather than a seller decision.
• A price reduction is the seller lowering the sales price instead of paying anything. It is the only one of the seven that is not a contribution, which is why it is the only one with no ceiling.
• A lender credit is money the lender puts toward your costs, usually bought with a higher interest rate. It is the instrument that answers who else is allowed to pay.
• Seller-completed repairs is the seller fixing the thing before closing. It moves no money to you at all, and it is the baseline the other six are measured against.

The cap is the thing that decides most of these

Lenders have a term for money reaching a buyer from anyone with a stake in the sale closing: an interested party contribution. Fannie Mae's Selling Guide at B3-4.1-02 defines it as "contributions made by third parties with a vested interest in the transaction," used "to cover costs that are typically the buyer's responsibility." Every loan program puts a ceiling on that money, and the ceiling is not negotiable by the seller's willingness.

On conventional financing the ceiling is a ladder rather than a number. Fannie Mae allows 3% where the loan-to-value ratio is above 90%, 6% between 75.01% and 90%, and 9% at 75% or less, with 2% on an investment property at any ratio, measured against the lesser of the sales price or the appraised value. Freddie Mac publishes the same ladder, so it is fair to describe this as the position of both conventional investors. FHA is flat: interested parties may contribute up to 6% of the sales price toward origination fees, other closing costs, prepaid items and discount points. VA limits seller concessions to no more than 4% of the home's reasonable value, which is the figure on the Notice of Value and not necessarily the price. USDA's guaranteed program is capped by regulation at 6% of the sales price under 7 CFR 3555.102(h), drafted as a restriction on the guarantee rather than as a permission.

Run that on one house. A buyer putting 3% down sits above 90% loan-to-value and has 3% of room, and that 3% has to cover everything the seller contributes, not just the inspection money. A buyer putting 25% down has three times as much, on the same house, from the same seller. Same request, two answers, and no amount of negotiating skill explains the difference.

What happens when a cap is breached

This is the mechanical fact that makes the instruments non-interchangeable. An over-cap contribution is not trimmed to fit. Fannie Mae splits the category in two: financing concessions, which are contributions toward borrower closing costs or homeowner association assessments and are limited to twelve months past settlement, and sales concessions, which take in cash gifts, rebates, personal property and any financing concession above the maximum. Sales concessions, in the guide's words, "must be deducted from the property's sales price for LTV/CLTV calculations." FHA reaches the same destination by a different route, treating contributions above 6% as an inducement to purchase and applying a dollar-for-dollar reduction to the sales price before the loan-to-value ratio is calculated.

The direction of that is what hurts. A negotiated price reduction lowers the price and the loan together, which the lender is content with. A reclassified over-cap credit lowers the value basis while the loan was already sized against the higher price, which raises the loan-to-value ratio and can break an approval that was in place. A reader who asks for a generous credit and gets agreement from a generous seller can still end up worse off than one who asked for less.

The carve-outs, which is where the remaining room is

The caps have exceptions, and they are the most useful thing on this page for a buyer who has run out of ceiling.

• Real estate commissions. FHA states that payment of agent commissions or fees typically paid by the seller under local or state law or custom "is not considered an Interested Party Contribution." A seller paying a buyer-agent commission does not eat into the room available for a repair credit on an FHA loan. USDA has proposed the same exclusion, in a rule published in April 2026 whose comment period has closed; until a final rule exists, USDA's 6% is still 6% of everything.
• Ordinary closing costs on a VA loan. This is the distinction most often reported wrongly. VA does not limit credits for a loan's closing costs at all. The 4% applies to "anything of value added to the transaction at no additional cost to the buyer" such as funding fee credits, debt payoff or prepaid hazard insurance. A seller paying a VA buyer's normal closing costs is not making a concession.
• Lender premium pricing credits under FHA, excluded from the 6% limit provided the lender or third-party originator is not also the seller, agent, builder or developer. Note that FHA's own list of interested parties includes lenders, so this is a carve-out rather than a general rule.

How much of the money actually reaches you

Two instruments can be worth the same on paper and very different at the table.

A credit arrives entirely at closing and reduces the cash you bring, which is why it suits a buyer near the bottom of their savings. It does not touch the price, the loan or the payment, and the appraisal still has to support the original figure. A price reduction lowers price, loan and down payment together, so only the down-payment share comes back at the table and the rest arrives across the term. An escrow holdback reaches you only when the work is signed off, and on a USDA loan it may never reach you as cash at all: leftover escrow funded by seller concessions must reduce the principal balance or go to an eligible loan purpose, while the buyer's own funds can be returned. And on an FHA loan, interested party contributions may not be used for the borrower's minimum required investment, the share of the purchase the borrower has to put in themselves, so a seller credit cannot become your down payment.

The holdback is a lender product, not a negotiating instrument

Buyers reach for a holdback as a general-purpose answer to work that cannot be finished in time, and lenders treat it as a narrow accommodation. Fannie Mae funds a completion escrow at 120% of the estimated cost, or 100% where there is a guaranteed fixed-price contract, requires completion within 180 days of the note date, limits the work to no more than 10% of the as-completed appraised value, requires confirmation on Form 1004D, and will only accept items postponed "for a valid reason, such as inclement weather or a shortage of building materials." A seller who would rather not do the work before closing is not a valid reason. FHA publishes no multiplier, requiring only funds sufficient to cover the cost, and conditions the whole thing on the house being habitable and safe for occupancy at the time of loan closing. USDA requires escrowed funds of not less than 100% of the repair cost contract, work estimated at no more than 10% of the total loan amount, and completion within 180 days of closing.

The figure of 150% of a repair estimate circulates widely in brokerage and lender marketing and appears in no agency source read for this site. The verified multipliers are Fannie Mae's 120% and USDA's 100% minimum.

The lender is allowed to pay too

A buyer who has hit the seller-concession ceiling has a third possible payer, and it is the one governed by federal regulation rather than by agency guides. Regulation Z treats lender credits as the sum of non-specific credits, which are generalized payments from the creditor to the consumer, and specific credits, which pay a particular fee, and describes both as negative charges to the consumer. It also makes them unusually binding: where the actual credit delivered is less than the amount estimated on the Loan Estimate, the shortfall is treated as an increased charge to the consumer for good-faith purposes. A lender credit on paper is harder for a lender to walk away from than a seller credit is for a seller.

What sellers actually do, as distinct from what they could do

In the National Association of REALTORS 2025 Profile of Home Buyers and Sellers, covering transactions completed between July 2024 and June 2025, only 27% of sellers offered any incentive at all. Among all sellers, 11% gave assistance with closing costs, 9% provided a home warranty policy, 7% gave a credit toward remodeling or repairs, 5% gave some other incentive and 1% paid for a rate buydown. Those are shares of every seller surveyed, not success rates for requests actually made, and the distinction matters because no published source measures how often a post-inspection credit request is granted. The same report puts the median sale at 99% of the asking price, which is the width of the room this whole negotiation happens inside.

The ordering in that list is itself a negotiating fact. Closing-cost assistance is given to more than one and a half times as many buyers as a repair credit is. The same money, framed as the thing sellers are already used to agreeing to, is a different conversation from money framed as paying for the inspector's findings.

Choosing, and when not to ask

1. Get your own ceiling from your loan officer: your program, your loan-to-value, your number. This single question prevents most failed credit requests.
2. Decide whether you need cash at closing or a lower price. That answer picks the instrument before any amount is named.
3. Separate out anything the loan will require anyway. Those repairs are happening regardless and cost you none of your own leverage.
4. Ask who will hold the money if the work cannot be finished, and accept that the answer is the lender's to give.
5. Put it on the amendment, because an agreement that never reaches the form never happened.

And the part a reference owes you: sometimes the answer is not to ask. A request above your program's ceiling cannot be granted as a credit however reasonable it is, a trivially small request spends credibility you will want later, and a buyer who intends to close regardless is negotiating without the one asset that moves the other side. Knowing that is worth more than a better script.