Concessions are financial contributions offered by the seller or another party to facilitate a sale, typically in the form of closing cost assistance, rate buydowns or credits applied at closing. While they do not change the contract price on paper, concessions effectively reduce the seller's net proceeds and can inflate the reported sale price relative to true market value.
Appraisers are required to research and adjust for concessions when analyzing comparable sales, and failure to do so can result in overstated value conclusions. Excessive or undisclosed concessions may signal an inflated contract price and are a recognized red flag in mortgage fraud detection. Loan originators should verify that seller concessions are disclosed and within program limits before closing.