October 5th, 2026 5:24 PM by Salim Kader
When mortgage rates are elevated, affordability is usually discussed as a home buyer issue. But financing conditions can affect sellers too.
Most financed buyers are not looking only at a home's purchase price. They are also evaluating the monthly payment and the amount of cash they will need at closing. When those numbers become uncomfortable, buyers may lower their price range, negotiate more aggressively, or decide not to make an offer.
For home sellers in Seattle and throughout Washington, this creates another consideration: before automatically reducing the price, could an allowable seller concession help make the transaction more affordable for a qualified buyer?
Purchase price is important, but a financed buyer also has to consider the monthly cost of owning the home.
The mortgage payment can include principal and interest, property taxes, homeowners insurance, mortgage insurance when applicable, and possibly HOA dues. A change in mortgage rates can therefore affect purchasing power even when home prices have not changed.
That means sellers may benefit from looking at affordability from two directions:
There are certainly situations where reducing the asking price is the appropriate strategy. If a home is priced above comparable properties, is receiving limited activity, or presents an appraisal concern, a price adjustment may help bring the property in line with the market.
However, when a property is reasonably priced and a prospective buyer's primary concern is affordability, an allowable seller concession may be another option worth evaluating.
Depending on the mortgage program and transaction, seller concessions may potentially help with certain eligible closing costs or financing expenses. The amount and permitted uses vary by loan program and transaction.
The objective is not to assume that a seller concession is better than a price reduction. Instead, buyers and sellers can compare the available options before deciding how negotiated dollars might be used most effectively.
One possible use of an allowable seller concession is to help pay discount points associated with obtaining a lower mortgage interest rate.
A discount point is an upfront mortgage charge associated with a discounted interest rate. One discount point equals 1% of the loan amount.
For example, on a $500,000 mortgage:
When permitted under the applicable loan program, an agreed-upon seller concession may potentially cover some or all of eligible discount points rather than requiring the buyer to pay the entire amount out of pocket.
There is no fixed conversion between one discount point and a specific reduction in the mortgage interest rate.
You may sometimes see examples where approximately one point is associated with a reduction of around one-quarter of a percentage point in rate. For example, a hypothetical 7.00% rate might be compared with a 6.75% rate after paying points.
However, that relationship should be treated only as an illustration. Actual mortgage pricing can produce a larger or smaller rate reduction.
The result depends on factors such as the lender, loan program, loan amount, credit profile, property characteristics and financial-market conditions at the time the loan is priced and locked.
For this reason, buyers and sellers should review the lender's actual pricing rather than assuming that a particular dollar amount of seller concession will produce a predetermined interest rate.
Suppose a seller is considering a substantial price reduction. A lower purchase price will reduce the amount being financed when the rest of the transaction remains the same.
But another possibility may be to negotiate an allowable seller concession and evaluate whether some of those funds could be used toward eligible discount points.
If the points result in a lower permanent note rate, the buyer may receive a lower principal-and-interest payment for as long as that mortgage remains outstanding.
That does not mean a permanent rate buydown is always the better choice. The cost of the points should be compared with the resulting monthly savings and the amount of time the buyer expects to keep the mortgage.
A mortgage professional can help calculate the approximate break-even period and compare the available pricing before the parties decide how to structure the concession.
Depending on the mortgage program, another possible use of seller funds is an eligible temporary interest-rate buydown.
A common example is a 2/1 temporary buydown. Rather than permanently changing the mortgage note rate, funds are established at closing to subsidize a portion of the borrower's scheduled payments during the initial period.
For illustration only, if the actual note rate were 7.00%, a typical 2/1 structure could result in payments calculated using an effective rate approximately:
The important distinction is that the actual note rate remains 7.00% in this illustration. The temporary buydown provides a payment subsidy during the initial period; it does not permanently change the note rate.
Eligibility, borrower qualification, permitted sources of buydown funds, and seller-contribution limits depend on the applicable mortgage program and lender requirements.
Although both strategies may involve seller concessions, they work differently.
A permanent buydown uses eligible discount points to obtain a lower note rate. The benefit generally continues for as long as the borrower keeps that mortgage.
A temporary buydown provides payment assistance for a defined initial period while leaving the underlying note rate unchanged.
A buyer who expects to keep the mortgage for many years may place greater value on a permanent rate reduction. Another buyer may place greater value on reducing the initial payments or preserving cash at closing.
Neither approach is automatically superior. The actual numbers should be compared for the individual transaction.
Seller concessions are not unlimited and cannot simply be used for any purpose the parties choose.
The maximum allowable contribution and eligible uses depend on factors such as the loan program, occupancy, loan-to-value ratio and other underwriting requirements.
Seller-funded permanent or temporary rate buydowns may also count toward applicable interested-party contribution or seller-concession limits.
Seller concessions generally cannot be used to circumvent minimum borrower contribution requirements, provide an impermissible cash benefit to the buyer, or otherwise exceed applicable program guidelines.
For that reason, buyers and sellers should coordinate the proposed concession with the mortgage professional and real estate professional before finalizing the purchase agreement.
Housing conditions can differ substantially between Seattle neighborhoods and communities throughout King, Snohomish and Pierce counties.
A property that needs a price adjustment should not rely on financing incentives as a substitute for appropriate pricing. But when a home is competitively priced and the buyer is focused on monthly affordability or cash required at closing, seller concessions may provide another negotiating tool.
For example, before automatically reducing a price by $10,000 or $15,000, the parties could compare what that price reduction accomplishes with what an allowable seller concession of a similar amount might accomplish when applied toward:
The comparison may help determine which structure provides the most meaningful benefit for that particular buyer and transaction.
Seller concessions are not merely a listing strategy. Buyers may benefit from understanding these options before submitting an offer.
Instead of negotiating exclusively over purchase price, a buyer may want to compare:
The appropriate choice depends on the buyer's financing, available cash, expected length of homeownership, current mortgage pricing and financial objectives.
Some buyers may consider a temporary financing strategy with the expectation that they will refinance if mortgage rates decline later.
Refinancing may become an option, but future mortgage rates cannot be predicted or guaranteed.
A future refinance would also depend on the borrower's qualifications, property value, equity, available loan programs and market conditions at that time.
The mortgage selected today should therefore make reasonable financial sense based on the buyer's current circumstances rather than depending on a future refinance.
Mortgage rates affect more than home buyers. They can influence purchasing power, monthly payments, negotiations and the strategies available to sellers.
For Seattle-area sellers, reducing the price may sometimes be exactly the right decision. In other transactions, an allowable seller concession may provide another way to address buyer affordability.
The important question is not simply whether to reduce the price. It is whether a price adjustment, seller concession, or combination of allowable strategies provides the most appropriate solution for the transaction.
Before making a substantial price reduction or negotiating a seller concession, consider having the real estate and mortgage professionals run the numbers.
Sometimes price is the issue. Sometimes financing is the issue. Understanding both can lead to a better-informed decision
Every real estate decision is different. Whether you're preparing to sell, searching for your next home, or trying to understand how financing and seller concessions may affect a transaction, I'm here to help you evaluate your options.
For Seattle-area buyers and sellers, understanding both the real estate market and the financing side of a transaction can help you make a more informed decision.
Local real estate guidance backed by experience. Serving Seattle and surrounding communities since 2006. No obligation—just helpful information to get you started.