Why Buyers Are More Likely To Get Concessions Right Now

Why Buyers Are More Likely To Get Concessions Right Now

Especially in markets where inventory is increasing, both sellers and homebuilders are offering more perks to attract buyers—things like mortgage rate buy-downs, help with closing costs, and more. In real estate, these are known as concessions or incentives.

What Are Concessions and Incentives?

When a seller or builder offers something extra to make the deal more appealing, it’s referred to as a concession or incentive:

• A concession involves a seller giving something up or agreeing to specific terms to help finalize the deal.

• An incentive is a perk that’s offered upfront by a builder or seller to catch a buyer’s attention and encourage them to purchase.

Here are some common examples being offered today:

• Contributions toward closing costs

• Mortgage rate buy-downs (to temporarily lower your interest rate)

• Discounts or reduced prices

• Free upgrades or appliances

• Home warranties

• Minor home repairs

These extras can significantly lower out-of-pocket costs—something especially helpful if you're on a tight budget. As the National Association of Realtors (NAR) notes:

“. . . they can help reduce the upfront costs associated with purchasing a home.”

Builders Are Making It Easier To Buy

It’s not just a few builders doing this. Many are adopting this approach. According to Zonda:

“Incentives continued to be popular in March, offered by builders on 56% of to-be-built homes and 74% of quick move-in (QMI) homes, which can likely be occupied within 90 days.”

Why? Builders don’t want inventory sitting unsold. To keep homes moving, many are adjusting prices—something backed by recent data from the National Association of Home Builders (NAHB) (see graph below):

Roughly 30% of builders reduced prices during each of the first four months this year. While most haven’t made price cuts, this still signals that some builders are open to negotiating in order to finalize sales.

This isn’t a red flag for the market—it’s a window of opportunity for buyers. With the majority of builders offering incentives and nearly 1 in 3 cutting prices, chances are good that if you're eyeing a new construction home, the builder may offer something to help you seal the deal.

Existing Home Sellers Are Sweetening the Deal, Too

There's also been an uptick in the number of existing homes (previously lived-in homes) hitting the market. That rise in competition is prompting sellers to step up their game. In fact, more than 44% of existing home sellers gave concessions to buyers in March (see graph below):

If you check the graph for pre-pandemic trends, you’ll notice that the current 44% is actually a return to typical levels. After years where sellers held most of the power, the market is starting to shift toward more balance – which can be a big advantage for buyers.

Keep in mind, concessions don’t always translate to major price cuts. While price reductions are part of it, sellers may also offer things like covering repair costs, including appliances, or contributing to closing costs.

And with home values increasing over 57% in the last five years, small concessions allow sellers to make their homes more appealing without sacrificing profit.

Bottom Line

No matter if you're interested in new construction or an existing home, you’re likely to find some kind of incentive or concession that can help.

What kind of extra offer would make a meaningful impact on your decision to buy? Let’s discuss what’s possible given today’s inventory and local market conditions.