Hi Lisa - agent may be confused or mis-communication there it seems. FHA allows buyers to buy the house with a minimum of 3.5% down payment, not including the closing costs. But, there is no requirement whatsoever for you as the seller to pay anything on behalf of the buyer, UNLESS, of course, you all agree to do so contractually.
Many FHA buyers ONLY have the 3.5% in savings to put towards the required down payment; and if this is the case, then the buyer will need some closing cost assistance or help from you as the seller. And if you are unwilling to pay some money towards their closing costs, then that decision may impact truly whether or not that buyer can purchase your home. Again, they need the down payment of at least 3.5% plus typical closing costs for a purchaser is 2.5%, give or take. So, your agent may be trying to communicate this to you.
It's all negotiated, and your agent should be negotiating hard for you, while also making certain he/she is following your desire to get your house sold.
Hope this helps; feel free to email/call if I can give any 2nd opinion, behind that of your agent.
Keller Williams Realty