In regions where inventory is on the rise, homebuilders and sellers are making offers more attractive for buyers by covering closing costs, providing mortgage rate buy-downs, and more. This is commonly referred to in the industry as a concession or an incentive.

What Are Concessions and Incentives?

When a seller or builder offers you something additional to assist with your purchase, it's referred to as a concession or an incentive.

A concession is essentially something a seller agrees to give up or accommodate to help reach a compromise and finalize a deal.
An incentive is basically a benefit that a builder or seller promotes and provides upfront to draw in and motivate buyers.

Today, some of the most popular ones are:

Temporarily lowering your mortgage rate with a buy-down
Offering price discounts or reductions
Including upgrades or appliances
Providing a home warranty
Taking care of small repairs around the home

For buyers, having extras included can really make a difference—especially when you're on a limited budget. According to the National Association of Realtors (NAR):

““. . . they can help reduce the upfront costs associated with purchasing a home.”
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— National Association of Realtors (NAR)

Builders Are Making It Easier To Buy

Many builders are offering extras these days, not just a single one. This has become a common strategy across the industry. 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.”
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— Zonda

Builders don’t want their homes sitting on the market for too long; they aim to sell them quickly. The National Association of Home Builders (NAHB) reports that one effective strategy many builders are employing to keep their inventory moving is adjusting prices.

About 30% of builders have cut prices in the first four months of this year. While that indicates that many builders aren’t reducing prices, it also shows that some are open to negotiating with buyers to make a sale happen.

This isn’t a sign that the market is struggling; it’s actually a chance for you. With most builders offering incentives and about 30% lowering their prices, if you’re considering a newly built home, chances are your builder will be keen to make the deal more appealing for you.

Existing Home Sellers Are Offering More, Too

More existing homes have been coming onto the market, which means sellers are seeing increased competition. In fact, over 44% of sellers of existing homes offered concessions to buyers in March.

If you check out the graph from the years before the pandemic, you'll notice that 44% is getting back to what we consider normal. After a time when sellers had all the control, the market is starting to level out again. This shift can be beneficial for you as a buyer.

Concessions don’t always translate to a significant price cut. While many sellers are open to adjusting their prices, that's not the only option they consider. It might just be that the seller offers to cover repairs, includes appliances in the sale, or assists with your closing costs.

Home values have gone up over 57% in the last five years. So, making small concessions can be an effective way for sellers to attract buyers while still turning a profit.