The Biggest Misconception in Real Estate Right Now

As a full-time real estate advisor and investor, I’ve watched a misconception about how concessions have grown over the last four years. Today, nearly half of all home sales in Bend include them (according to data pulled from Cascades East MLS). Maybe you’ve heard the term, maybe you haven’t. Either way, let me break it down.

Concessions are negotiated into a real estate transaction during the initial draft of the offer or during repair phase. Regardless, they are credits the seller pays to the buyer to close the sale. These can vary greatly on the amount but on average they are about $10,000.

So what does it mean when nearly half of home sales in Bend are now closing with some form of seller concession? It means that these sellers are contributing money toward the buyer’s purchase, often helping with closing costs, prepaid expenses or an interest-rate buydown. These concessions can greatly change the story our market numbers tell.

We often hear that homes are still selling relatively close to their asking prices, but the recorded sale price doesn’t show the money a seller may have contributed to make the transaction happen. A home can sell for $700,000 and still have thousands of dollars credited back to the buyer at closing.

For sellers, that means the number you see attached to a recent neighborhood sale may not represent what that seller actually walked away with. For buyers, it means there may be more opportunity in this market than the asking price suggests.

Rather than negotiating exclusively on price, buyers are increasingly asking sellers to help reduce the upfront or monthly cost of purchasing the home. In many cases, that money can be more useful to a buyer than a comparable reduction in price.

New construction has accelerated the trend, coupled with increasing interest rates. Large builders have been aggressive with incentives, particularly through affiliated lenders. They can offer rate buydowns and closing-cost credits so large, they are difficult or sometimes impossible for the average homeowner to compete with.

That creates an unusual dynamic: advertised and recorded prices can remain relatively steady while the actual cost of getting a sale to close changes underneath them.

It’s also why simply looking at the sale price of the house down the street doesn’t tell you everything you need to know about today’s market. The market isn’t necessarily defined by dramatic price drops right now. Much of the negotiation is happening somewhere less visible. When nearly half of sales include them, that’s no longer a footnote. It’s part of the market.

If you are real estate curious, or already own real estate and want to sell, pay attention to these seller-paid concessions!

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