If you’re in the housing market for the first time, the mounting cost of everything can get pretty overwhelming, even if you’ve been saving carefully. After all, everybody knows to save five to 10 percent of our dream home’s cost for a down payment, but fewer people know that we need to be saving another similarly-sized fortune to cover our closing costs.

All these financial pains are almost enough to make any home buyer throw up their hands in frustration. After all, the economy’s still recovering, and you’ve got student loans, car payments, and children to support -where are you going to find so much extra money? Luckily, there’s a way around plopping down even more of your hard-earned cash than necessary on the closing table -you simply have to ask your future home’s seller to pay these fees for you.

I know it sounds overly simplified, but it really is that easy. As to why a seller would be willing to do this for you, there are several common reasons. One of the biggest is that someone else did it for them. Other sellers might believe they won’t find another buyer and will do what they must to move their home.

Whatever the reason, the seller’s concessions aren’t merely a generous gift. They’re another piece in the complicated real estate puzzle. 

What are Seller Concessions?

A seller’s concession is an amount of money paid toward closing on your behalf. Generally, this money is used to pay for closing costs, but sellers occasionally concede money if they realize their carpets are gross and need to be replaced or that their garage needs repairs they don’t really want to make.

In most cases, the seller’s concessions may look like a gift, but they’re really just a legal way to allow you to roll the closing costs of your trans-action into your loan. Don’t expect it to be simple, though. No matter what you’ve got to offer, the sellers have already decided on a final cash price they need from their home, so they’ll counter your offer with seller concessions until a final deal has been reached that gets them to their magic number. Sometimes, that’s going to drive your contract amount over the sales price, but as long as the home will appraise, it’s fine. The amount a seller can contribute varies widely between loan products. In general, a conventional loan allows anywhere from two to nine percent of your new home’s sales price in seller concessions, a VA up to four and FHA and USDA loans allow six percent in seller concessions. For buyers who are cash poor, this is great news because it means they’ll still be able to buy. If sellers weren’t allowed to give this money to buyers on paper, it would have long-reaching effects on the real estate market. 

What fees can sellers pay?

In practice, sellers can basically pay any of your settlement costs. The only thing most loan programs prohibit is the seller contributing to your down payment (and most banks will want you to pay for your own application or credit check fee). There’s a catch, though. If you want the seller to pay these items for you, you’ve got to get it in writing upfront.

Once you’ve got a pre-approval, you’ll have a good idea of what your closing costs will be and what loan program you’ll be using These are the two big pieces of information you’ll need to nail this low cash closing tactic. Some Realtors will go the easy route and ask the seller to pay up to three, four or six percent (depending on your loan program) in closing costs, prepaids and other fees on your behalf, but if you live in a low tax area and are purchasing a modest home, you may be leaving money sitting on the table.

If your closing costs are only actually going to be something in the neighborhood of four percent and you ask the seller for six percent, you’ve just given a whopping two percent of your purchase price to the sellers. That’s a generous tip for the benefit of signing one document -so it’s best practice to try to get close to the actual price of closing costs and expect to bring a few hundred extra dollars to the table instead.