Merchant concessions and merchant credits are often used interchangeably, but they are not the same. Contracts are incentives given to sellers to make the job more attractive. A seller’s credit is one type of seller’s approval designed to lower closing costs.
And in today’s consumer market, more and more retailers are offering deals. By May 2026, more than 46% of sellers have given approvals, according to Redfin.
Here’s what you need to know about these two.
What are the seller’s permissions?
A seller’s concession is any financial or material benefit that the seller offers to make the purchase more attractive to the buyer.
Seller consent can come in many forms, such as:
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Closing expense credits: A fixed dollar amount offered to sellers that can cover loan origination and underwriting fees, prepaid property taxes or HOA fees, or buy down the mortgage interest rate.
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Important property: Sellers may leave behind stage furniture or other expensive items that usually do not come with the home.
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Additional benefits: Sellers can include maintenance fees, moving expenses, home warranties, and other benefits unrelated to closing.
These deals can benefit both the buyer and the seller, lowering the cost of the home to the buyer without reducing its value to the seller.
What is merchant credit?
A seller’s credit is a type of seller’s approval, typically a cash credit toward the buyer’s closing costs.
Seller credits can include loan origination, appraisals, title insurance, and other common fees needed to close the deal. Merchant credit can be used to purchase discount points that lower the buyer’s interest rate.
There are limits on how much the seller can offer, usually 3 to 9 percent, depending on the type of loan and the down payment.
For example, a standard loan financing a $400,000 home purchase with a 5% down payment allows up to $12,000 in seller credits.
These credits can only be used toward closing costs — not toward a down payment or cash back to the buyer. The consumer never receives the credit directly; it simply reduces the amount they owe at closing, freeing up cash they can spend on things like purchase prices or repair costs. If the credit exceeds the closing costs, the excess is deducted from the purchase price, which can affect the amount of the loan approved and the amount of money the buyer has to bring to the table.
Merchant concessions versus merchant credits
Understanding merchant approvals versus merchant credits can be confusing. Here’s an overview of how each works.
Which is better for consumers?
Whether a seller’s loan or a different type of approval makes sense for you depends on your goals, financial situation, and the market.
Seller credit can be great if you’re short on cash or don’t want to drain your savings, as it directly reduces your closing costs.
The current environment of high interest rates may leave many home buyers preferring to purchase a value that lowers their long-term costs. Or if the home inspection is undergoing major repairs, you can opt for a repair loan.
Which is better for sellers?
Generally, sellers prefer not to make deals, as those can eat into profits.
However, deals can be an effective marketing strategy in a buyer’s market, where there is more inventory than there is demand, and sellers are competing for prominence.
The type of permit a seller chooses will likely depend on the local market, how long the home has been listed, its condition, and more.
Seller approval vs. seller credit FAQs
Are merchant approvals and merchant credits the same thing?
No, seller approvals and seller credits are not the same, although they are related. A seller’s concession is any incentive a seller gives to make a transaction more attractive. A seller’s credit is a concession that directly lowers a buyer’s closing costs.
Can merchant permits be used for partial payments?
A seller’s permit cannot be used for a down payment. A down payment indicates to lenders that the buyer has enough assets to finance the home purchase. So lenders generally don’t allow the seller, real estate agent, or others involved in the real estate transaction to finance the down payment.
How much can I ask for in dealer permits or credits?
Closing cost credits are limited to 3% to 9% of the home’s purchase price and cannot exceed closing costs. Some approvals, including cash credits above the maximum limit, are deducted from the purchase price, which can reduce the amount of the loan approval and ultimately how much the buyer has to pay out of pocket.
Can I request both a price reduction and a dealer concession?
While there is no rule against asking for both a price reduction and the seller’s consent, doing so can make your offer less attractive to the seller, especially if there are competing offers from other buyers. However, if you have a contract at a reduced price, and items appear in the inspection that you would like to take care of, you can request the seller’s approval at that time.
