Seller Concessions in San Francisco: What to Know Before Listing Your Home

Since 2002 at Danielle Lazier Real Estate, we've guided hundreds of San Francisco homeowners through the intricacies of selling their properties, including helping them to navigate seller concessions (aka seller assistance, seller contribution, or seller-paid closing costs).

In California, seller concessions can be used to pay for buyer agent fees, aka commission.

A key point to remember is that seller concessions—along with the listing price, pre-sale preparations, staging and presentation—are just one part of the overall tapestry of how we position your home on the SF real estate market. But for anyone considering listing a San Francisco home for sale, it’s helpful to understand seller concessions and how/when/why they might be used.

What Are Seller Concessions?

Seller concessions are when a home seller agrees to pay certain costs associated with the home purchase on behalf of the buyer. These concessions can make your property more attractive to potential buyers, particularly for those with limited upfront resources for things like repairs or even paying their San Francisco buyer's agent.

Think of seller concessions as a strategic tool in your home-selling arsenal. They can help you stand out in a crowded market, attract more potential buyers, and potentially lead to a faster sale. But like any tool, it's important to have a clear understanding and use them wisely.

Types of Seller Concessions in the SF Bay Area

When you're working with a top San Francisco listing agent, you might consider offering various types of concessions:

1. Buyer agent fees (aka buyer agent commission, buyer-side commission, buyer agent compensation, or just “BAC”): This is increasingly common and often a significant part of seller concessions. It's the compensation offered to the buyer's agent for bringing a buyer who successfully closes the transaction.
   
   Note: With the changes in 2024 around buyer-side commissions and buyer-agent agreements, we’ve covered this topic extensively on the blog. Read more here (and feel free to reach out with any questions):
   • New Rules for San Francisco Home Buyers in 2024: What You Need to Know
   • Real Estate Agent Commission Rates in San Francisco: Everything You Wanted to Know But Were Afraid to Ask
2. Covering closing costs: This is one of the most common types of concessions. It can include fees for title searches, loan origination, and other closing-related expenses.
3. Offering a home warranty: This can give buyers peace of mind about potential future repairs.
4. Assisting with loan origination fees: This can help buyers who are stretching their budget to afford the home.
5. Covering homeowners' association fees: For condos or homes in HOA communities, offering to pay a few months of HOA fees can be attractive to buyers.
6. Paying for home repairs or updates: If your home inspection reveals issues, you might offer to pay for repairs or provide a credit for the buyer to handle them after the sale.

Pro tip on inspections and repairs: In San Francisco, it’s common for home sellers to get their own general inspection before listing to identify and remediate issues in advance, thereby ensuring their home is in tip-top selling shape. Our local market has a large proportion of buyers willing to pay a premium for a home that is in updated, move-in-ready condition. Even so, all of this is flexible and negotiable. For example, if you’re already aware of an issue, you could offer the buyer a credit to have the repairs done themselves.

The common thread is that these seller subsidies can help buyers stretch their budgets further, making your property more accessible and desirable to a wider range of potential purchasers. Depending on the state of the San Francisco market, as well as your unique property and personal situation, this can be an advantage.

How Seller Paid Closing Costs Work

Seller paid closing costs, including buyer agent fees, are one of the more common forms of concession in the SF Bay Area real estate market. Here's how they typically work:

1. The concession is negotiated as part of the home purchase agreement.
2. It's usually written as a specific dollar amount in the contract.
3. The concession becomes binding once it's included in a signed purchase agreement.

For instance, let's say you're selling your Noe Valley condo. A potential buyer loves the property but requests that you compensate their agent with a 2.5% commission. You might agree to this, or you might negotiate a higher purchase price to offset the cost. Alternatively, you might offer to pay 2% and see if the buyer is willing to cover the remaining 0.5%.

It's important to note that while these concessions can make your property more attractive, they do effectively reduce your net proceeds from the sale. It’s a negotiation, with an eye on your bottom line. That's why it's crucial to work with an experienced top SF realtor who can help you balance the benefits of concessions with your financial goals.

Advertising Seller Credits in the San Francisco Market

When you're ready to offer seller credits, there are several ways to let potential buyers know:

1. Public advertisements: You can include information about concessions in the property listing and marketing materials.
2. Multiple Listing Services (MLS): The MLS is a powerful tool for reaching potential buyers and their agents. This is the industry database for all the real estate listings, past and present, which syndicate out to real estate websites like Zillow and Realtor.com.
   
   Note: As of 2024, the National Association of REALTORS disallows the advertisement of buyer agent commissions on the MLS. This does not mean that you cannot offer this seller concession to prospective buyers, but only that it may not be included in the MLS listing for your property.
3. During purchase negotiations: Concessions can be discussed and agreed upon as part of the negotiation process.

It's important to note that not all MLSs allow concessions to be advertised, and some only permit a simple "yes" or "no" indication. As explained by the NAR’s Consumer Guide to Seller Concessions, if you choose to put a concession on an MLS, it must be written as the total sum of all concessions offered and can't be conditioned on the use of, or payment to, a buyer's agent. Buyer agent fees may not be advertised on the MLS at all.

At Danielle Lazier Real Estate, we're well-versed in the local MLS rules for SF listing agents and can guide you on the best way to market your concessions, if any, in the San Francisco real estate market.

Limits on Seller Contributions in California

While seller contributions can be an effective tool, there are limits to how much you can offer. These limits are typically set by:

1. The buyer's lender
2. California state law

When you’re ready to make a move, it's helpful to work with a San Francisco real estate agent who understands these limitations and can help you structure your concessions effectively. Notably, any payment you offer toward the buyer's broker's fee is excluded from this amount and must be made off-MLS.

Negotiating Concessions is a Two-Way Street

As we discussed in a previous blog post about buyer negotiations, real estate transactions are all about negotiation. When a buyer asks for concessions, you have several options:

1. Accept the request and move forward with the sale.
2. Counter with terms that are acceptable to you.
3. Decline the request and potentially look for a new buyer.

Remember, negotiation is a two-way street. While you want to make your property attractive to buyers, you also need to protect your own interests. That's where having an experienced SF listing agent becomes invaluable to facilitate a successful, expedient sale, and also ensure you’re not leaving any money on the table when all is said and done.

At Danielle Lazier real estate, we advocate fiercely on your behalf from start to finish. Learn more about Danielle's negotiating philosophy.

The Role of Home Inspections in Concessions

Home inspections often play a crucial role in concession negotiations. Even if you've provided a thorough disclosure package, buyers may discover issues during their own inspection that lead to requests for concessions.

Common requests might include:

• Credits for necessary repairs
• Actual completion of repairs before closing
• Price reductions to account for newly discovered issues

As a seller, it's important to be prepared for these possibilities. As we mentioned earlier, having your own recent inspections can help you anticipate and address potential issues proactively.

The Holistic Approach to Seller Concessions

Remember, seller concessions, including buyer agent fees, should be considered holistically in the full context of the offer price and terms. Here's how we approach it as top SF real estate listing agents:

1. Net Proceeds Focus: We help you calculate your potential net proceeds under different scenarios, considering the offer price, concessions, and other terms.
2. Flexibility in Negotiations: We might suggest being open to higher buyer agent fees if it means attracting a buyer willing to pay a higher purchase price.
3. Market Conditions: We consider current market conditions. In a seller's market, you might offer fewer concessions, while in a buyer's market, more concessions might be necessary to attract offers.
4. Your Specific Situation: Your timeline, financial needs, and other personal factors all play a role in determining the right approach to concessions.

Taking this comprehensive view, we help you make informed decisions that align with your goals and maximize your returns from the sale of your San Francisco home.

Why Choose Danielle Lazier Real Estate for Your San Francisco Home Sale

At Danielle Lazier Real Estate, we bring a wealth of experience in navigating seller concessions in the San Francisco market as top SF listing agents and buyer specialists for over two decades. Our approach combines:

• In-depth knowledge of San Francisco neighborhoods and hyperlocal micro-markets
• Expert guidance on seller concessions and other pricing and negotiating strategies
• A personalized, boutique experience in preparing and marketing your property
• Skilled negotiation to maximize your sale price while using concessions strategically

Most of all, we understand that every home sale and situation is unique, so we'll collaborate closely with you on a strategy and timeline that works best for your specific needs and goals.

Ready to get started? Let’s see if we’re a good fit to work together and help maximize your results selling your San Francisco home. Contact us here. We look forward to hearing from you!