Update: Since this article was first published, Fannie Mae and Freddie Mac both weighed in on the Sitzer litigation and clarified that where it is customary in the market for sellers to offer cooperative compensation, the amount paid for buyer agent commission will not count against seller concession limits for mortgage financing purposes. Loan products for investment properties cap concessions at 2%, and purchase transactions at 3% to 9% depending on loan-to-value. Those figures will remain free of commission additions where the practice is customary. This is a meaningful win for homebuyers nationwide.
When sellers pay buyer agent commissions through seller concessions, the appraised value of the home takes a direct hit. The commission amount gets subtracted from the comparable sale price before it is used in future valuations, which means the market value baseline for the entire neighborhood edges down with each transaction structured this way. I am Robbie English, REALTOR and Broker with Uncommon Realty. Here is a detailed breakdown of exactly how that happens and what it means for sellers, buyers, and the market.
What Seller Concessions Actually Are
A seller concession is any financial contribution a seller makes on behalf of the buyer at closing. Covering closing costs, buying down an interest rate, paying HOA transfer fees, and reimbursing a buyer agent commission all fall into this category. Each one of these items is recorded in the transaction, and each one requires an adjustment when that sale is later used as a comparable.
That last point is where the value problem originates. The comparable still closed at the contract price. The public record shows the full number. But a competent appraiser or real estate professional working a proper comparative market analysis has to subtract the concession to arrive at an accurate net sale price. The market did not pay the full contract price for the home. It paid the contract price minus what the seller contributed back to the buyer.
Why Appraisers Back Out Seller Concessions
Fannie Mae defines market value as the price a property would sell for under normal conditions, without special financing arrangements or concessions influencing the outcome. That definition is not casual guidance. It is the standard appraisers must follow when determining whether a comparable sale accurately reflects open-market conditions.
When a comparable sold for $300,000 and the seller paid $9,000 in concessions, the appraiser using that sale is not treating it as a $300,000 data point. After the concession adjustment, it functions as a $291,000 data point. The subject property being valued today is compared to that adjusted figure, not the contract price.
One more thing worth clarifying: appraisers do not include agent commissions as a direct value adjustment to the subject property itself. The seller’s listing agreement is not part of the appraisal file, and commissions have never been standardized in a way that would support that kind of line-item adjustment. The value impact comes entirely through the concession adjustment on comparables, not through any assumption about what the seller paid an agent.
A Worked Example: The Numbers Side by Side
The mechanism becomes clearer with a side-by-side comparison. Consider two properties in the same neighborhood that both close at the same price.
The sale in the second row looks identical to the first from the outside. Both closed at $300,000. But when the next seller on that street needs three comparables to support their list price, the second transaction drags the average down by $9,000. If several sales in a neighborhood carry similar concession structures, the suppression compounds. The sellers who follow are working off a lower baseline before they ever list.
The CMA Problem That Compounds the Issue
A detailed comparable market analysis accounts for concessions. A quick CMA built around price per square foot typically does not. That gap matters more than most sellers realize because the two methods can produce materially different pricing recommendations for the same property.
When an agent runs a surface-level CMA and the appraiser runs a full appraisal, the seller often sees a gap between the two numbers at the worst possible moment: after the contract is signed and the appraisal comes in low. The concession adjustments the agent skipped are exactly the kind of variable the appraiser will not skip. Getting those adjustments right from the start is how a competent agent protects a seller from that scenario.
This is also why sellers who received high list-price recommendations from agents using unadjusted comparables sometimes face price reductions or renegotiations mid-contract. The CMA shortcut looks fine until the appraisal report arrives.
How This Plays Out When Buyer Agent Commissions Move to Concessions
Seller concessions are not inherently harmful. A seller can offer them strategically to attract a buyer or compete in a slower market. The issue is what happens downstream when those sales become the comparables that define value for everyone else in the neighborhood.
If paying buyer agent commissions through seller concessions becomes standard practice across a market, the effect will not show up immediately in list prices. Sellers will still aim for the same numbers. The suppression shows up later, when appraisers pull comparables and each one carries a concession adjustment. Future transactions start from a lower adjusted baseline. Over time, the cumulative effect pulls market values down in a way that affects every homeowner in the area, regardless of whether they offered a concession themselves.
The counterargument that sellers will simply lower prices once buyers stop having representation misses the timing problem. Sellers will resist lowering prices initially. But if commissions migrate to the concession column at scale, the market value reduction happens anyway through the appraisal adjustment process rather than through list price negotiation.
What This Means If You Are Selling Now
If you are selling a home today and considering how to structure compensation for a buyer’s agent, the concession route has a cost that does not appear on the settlement statement. It appears on the appraisal of the next home sold on your street.
That is not a reason to avoid concessions in every situation. It is a reason to understand the full picture before you decide. A seller who knows that a $9,000 concession functions as a $9,000 downward adjustment to their comparable sale value is better positioned to weigh that choice than one who treats it as a neutral line item. Discussing the structure of any proposed concession with an agent who runs a thorough CMA, not a quick one, is the starting point for making that call with accurate information.
I am a real estate professional with Uncommon Realty and not a licensed appraiser. What I present here represents an approach to estimated sale price analysis. It is not the same as the opinion of value in an appraisal developed by a licensed appraiser under the Uniform Standards of Professional Appraisal Practice.
Great perspective, Robbie, thank you for laying this out so clearly. The way you explained how shifting buyer agent commissions into seller concessions can quietly impact appraised value really hit home, especially for sellers who think it is a neutral move. This is one of those topics that sounds simple on the surface but has real downstream consequences, and your point of view brings much needed clarity to a conversation a lot of people are misunderstanding right now.