New Jersey Home Buyers Are Asking for More Seller Concessions — Here’s What That Means

The housing market is changing, and one trend is becoming increasingly important for both New Jersey home buyers and sellers: seller concessions.

According to a recent Redfin report, sellers provided concessions in 44.7% of U.S. home sales in August, up from 42.6% one year earlier. That was the highest percentage recorded for the month of August since at least 2020.

For buyers and sellers here in New Jersey, the bigger message is simple:

The asking price is only one part of the negotiation.

Today’s real estate transaction can include closing-cost assistance, mortgage-rate buydowns, repair credits and other incentives that may help bring buyers and sellers together.

What Is a Seller Concession?

A seller concession is something of value that the seller agrees to provide to the buyer as part of the transaction.

Instead of simply lowering the sales price, a seller may agree to contribute money toward certain buyer expenses.

Depending on the transaction and the buyer’s mortgage program, concessions may be used for expenses such as:

• Buyer closing costs
• Prepaid taxes and insurance
• Mortgage discount points
• Temporary or permanent interest-rate buydowns
• Inspection-related credits
• Certain repairs
• Other allowable financing costs

The amount a seller may contribute depends on the buyer's mortgage program, down payment, occupancy and other lending requirements.

That is why it can be valuable to have the real estate agent and loan officer working together before an offer is written.

Why Are More Buyers Asking for Concessions?

Nationally, buyers have been gaining negotiating power as more homes become available and fewer properties receive the intense competition seen during the pandemic-era housing market.

Redfin reported that some markets now have significantly more sellers than buyers.

That doesn't mean every New Jersey community has suddenly become a buyer's market.

Real estate is extremely local.

A properly priced home in Cape May County, South Jersey or another desirable New Jersey neighborhood can still receive substantial interest, while another property only a few miles away may sit on the market and require stronger incentives.

Condition matters too.

A renovated, move-in-ready home may attract buyers quickly, while a property needing updates may face requests for repairs, credits or closing-cost assistance.

New Jersey Buyers Should Look Beyond the Sales Price

One of the biggest mistakes a buyer can make is focusing exclusively on getting the seller to reduce the price.

A price reduction sounds attractive, but it doesn't always produce the greatest immediate financial benefit.

For example, imagine purchasing a home for $400,000.

If you negotiate a $10,000 reduction in the purchase price, your mortgage payment may decrease—but potentially by a relatively modest amount each month.

If that same $10,000 were structured as an allowable seller concession, however, it might help pay closing costs or potentially be used toward reducing the buyer's mortgage interest rate.

Depending on the loan and circumstances, that could provide considerably more immediate value.

This is why buyers should ask:

“What is the best way to structure this offer?”

rather than simply:

“How much can we get them to lower the price?”

Mortgage Rate Buydowns Can Be a Powerful Negotiating Tool

One increasingly useful option is asking the seller to contribute toward a mortgage-rate buydown.

Instead of the seller cutting the home's price substantially, some of that money may be applied toward lowering the buyer's financing cost.

Depending on the mortgage program, buyers may have options including temporary buydowns or permanent discount points.

A lower interest rate can affect the buyer's payment every month.

For example, when comparing two offers, a buyer may discover that asking for help lowering the mortgage rate provides more practical benefit than negotiating the same dollar amount off the purchase price.

Every situation is different, so the numbers should be calculated before making the offer.

Inspection Negotiations Are Changing Too

Seller concessions are also becoming part of home-inspection negotiations.

Rather than requiring a seller to complete every repair before closing, a buyer and seller might negotiate a credit.

This can sometimes simplify the transaction.

The buyer receives funds toward qualifying expenses, while the seller avoids coordinating contractors and repairs before settlement.

However, repair credits and concessions must be structured correctly because mortgage guidelines can limit how credits are applied.

What Does This Mean for New Jersey Sellers?

Sellers shouldn't automatically view concessions as losing money.

Sometimes a strategically structured concession can protect the seller's overall sales price while helping the buyer overcome the biggest obstacle preventing the purchase.

Consider a buyer who likes the home but is concerned about:

• Cash needed at closing
• Current mortgage rates
• An aging HVAC system
• An older roof
• Cosmetic updates
• Inspection findings

Instead of immediately cutting the asking price, the seller may have several ways to address those concerns.

The objective should be to determine:

What concession helps the buyer the most while costing the seller the least?

That can be very different from simply reducing the price.

Pricing Still Matters

Nationally, Redfin found another important trend.

Approximately 15.8% of homes sold in August received both a price reduction and a seller concession.

That should get the attention of anyone preparing to sell a home.

A seller who starts significantly above market value may eventually find themselves doing two things:

1. Reducing the asking price.
2. Offering concessions anyway.

That can sometimes be avoided with the right pricing and marketing strategy from the beginning.

In New Jersey, where conditions can change substantially from one municipality or even one neighborhood to another, sellers should examine recent comparable sales, active competition, days on market and buyer activity before determining their initial price.

The Jersey Shore Can Be Especially Property-Specific

Markets such as Cape May, North Cape May, Wildwood, Wildwood Crest, North Wildwood, Villas, Stone Harbor and Avalon can behave differently from traditional year-round housing markets.

One property may appeal primarily to a full-time resident, while another may attract:

• Second-home buyers
• Vacation-home buyers
• Investors
• Short-term rental buyers
• Retirees
• Buyers relocating to the Shore

Financing strategies can also differ dramatically depending on whether the home will be a primary residence, second home or investment property.

That makes it even more important to evaluate the entire transaction, not simply the listing price.

Buyers May Have More Negotiating Options Than They Realize

Today's buyer shouldn't automatically assume the seller will reject a request for assistance.

Depending on the property and market conditions, there may be opportunities to negotiate:

• Closing-cost assistance
• Mortgage-rate buydowns
• Repair credits
• Home warranties
• Included appliances
• Flexible closing dates
• Inspection solutions
• Other allowable concessions

The key is understanding which requests provide the greatest value without making the offer unattractive to the seller.

Sellers Should Consider the Buyer's Financing

This is another area where having both real estate and mortgage knowledge can make a significant difference.

A seller might be considering a $10,000 price reduction without realizing that contributing some or all of that amount toward an allowable financing strategy could make the property more affordable to a much larger group of buyers.

That can potentially help a home sell faster while preserving more of the seller's desired price.

The numbers need to be evaluated carefully because concession limits vary by mortgage program.

The Bottom Line for New Jersey Real Estate

The current housing market is creating more room for creative negotiation.

For buyers, that may mean an opportunity to purchase a home with less cash needed at closing or potentially secure a more affordable mortgage payment.

For sellers, concessions can become a marketing and negotiating strategy rather than simply an expense.

And sometimes the smartest deal isn't the one with the lowest price.

It's the deal that's structured correctly.

If you're thinking about buying or selling a home in New Jersey or Florida, I can help you look at the transaction from both sides or just one side—the real estate price and the financing—so you can understand the options before deciding how to structure an offer.

Lawrence Sarlo
Realtor & Mortgage Loan Officer
Tesla Realty Group | Loan Factory
NMLS #2540210
Call or Text: 609-868-1171
NJHomeHunter@gmail.com

Mortgage programs, seller-concession limits, interest rates and qualification requirements vary. Information is for educational purposes and is not a commitment to lend. Consult your mortgage professional regarding options available for your specific transaction.

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