Should You Ask for a Seller Credit or a Price Reduction?

When you’re writing an offer, two levers can meaningfully change your bottom line: a seller credit or a price reduction. They aren’t interchangeable—and depending on your goals (lower monthly payment, less cash at closing, stronger appraisal, rate buydown), one may serve you better than the other.

This guide breaks down how each option works, when to use it, and how I help buyers in the DMV decide what’s most strategic for their situation.

Quick definitions

Seller credit (aka seller concession):
Money the seller gives you at settlement to cover allowable closing costs (and often to buy down your interest rate). Credits can’t exceed your actual closing costs and must fit your loan program’s concession limits.

Price reduction:
A lower purchase price agreed to by the seller. This reduces your loan amount and can help with appraisal risk. It does not directly pay your closing costs.

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What each option actually changes

If your top priority is lowering cash to close:

• A seller credit shines. It can offset lender fees, title/settlement costs, escrows, and prepaid items.
• A price reduction helps a bit because your down payment is a percentage of price, but the impact on cash is usually smaller than a well-sized credit.

If your top priority is lowering the monthly payment:

• A price reduction always trims your loan amount—so your principal and interest drop.
• A seller credit can beat a small price cut if you use it for a permanent rate buydown. When rates are elevated, points can move the needle more than a modest price change.

If you’re worried about appraisal:

• A price reduction helps. Lower price, easier appraisal.
• A seller credit is neutral on value; if the appraisal comes in low, we may need to adjust the structure.

If you want the cleanest underwriting path:

• A price reduction is straightforward.
• A seller credit is common but needs clean language in the offer and must stay within program limits.

If you care about your tax basis:

• A price reduction can lower the number local jurisdictions may use as a basis.
• A seller credit doesn’t change your contract price.

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DMV reality check on concession limits

(Always confirm with your lender; these are typical caps.)

• Conventional: Up to 3% of price with <10% down; 6% with 10–25% down; 9% with ≥25% down.
• FHA: Often up to 6%.
• VA: Sellers can pay standard closing costs; additional “concessions” are generally limited (commonly cited around 4%), excluding normal closing costs.

These limits are why I’ll coordinate with your lender before we negotiate, to be sure any credit is actually usable.

When a seller credit is the better lever

• You want to reduce cash to close.
• You plan to buy the rate down for bigger monthly savings than a small price cut would provide.
• The seller is motivated (new-builds and some resales like credits because they preserve the recorded sale price).

Watch-outs: Credits must be allowable under your loan type, can’t exceed actual closing costs, and may need to be rebalanced if the appraisal is tight.

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When a price reduction makes more sense

• Appraisal risk is on your mind or comps are thin.
• You value a smaller loan amount and potentially a lower tax basis.
• You already have funds for closing and don’t need a buydown.

Watch-outs: Price cuts don’t pay closing costs and may deliver less monthly savings than a smart buydown in certain rate environments.

The strategy I use with DMV buyers

1. Set the priority: Cash to close, monthly payment, appraisal certainty—or a mix.
2. Lender modeling: Side-by-side scenarios showing:
   1. Payment and cash to close with a price reduction
   1. Payment and cash to close with a seller credit used for points
   1. (If relevant) a temporary 1- or 2-1 buydown vs. a permanent buydown
3. Confirm program limits: Make sure any credit is fully usable.
4. Keep appraisal in view: If value is tight, we may favor a reduction—or a hybrid (smaller credit + modest reduction).

FAQs

Can I take a big credit and pocket the difference?
No. Credits can’t exceed your actual allowable closing costs and prepaid items.

Will a credit hurt my appraisal?
Not directly. But if value is tight, we might need to convert part of the credit to a price reduction.

Is a temporary buydown smart?
If you plan to refinance within 1–3 years, a temporary buydown can help early payments. For longer holds, a permanent buydown may work out better. Be sure to consult with your lender.

What about mortgage insurance (MI)?
A lower price can trim MI slightly. But the monthly impact from a permanent buydown can be larger—this is why we compare both.

Want help deciding which lever makes the most sense for your offer?
I’ll coordinate with your lender and run the numbers both ways—then we’ll structure a clean, strategic offer for today’s DMV market.