Typically a request for Seller Concessions would be made under the "Special Provisions" paragraph. It might say something like "Seller to contribute $--- towards the Buyer's closing costs." It is best to have an attorney craft the language or you may have a Buyer's Agent who has attorney pre-approved legal clauses they can help you with.
Remember, a Buyer's Agent will advocate on your behalf and have knowledge of the forms and use of approved clauses. The purchase price you ultimately pay will include a listing commission and a buying commission unless you are buying a property For Sale By Owner. If you deal directly with the listing agent you will still pay both sides of the commission. Wouldn't you rather have the buying side commission go to someone who is on your side rather than the seller's?
The amount of the concession is determined by the loan-to-value ratio of your mortgage and your lender can tell you what that maximum amount would be. With 20% down I believe 6% is usually the allowable amount.
Here's my thought about the "up to" clause. It's ambiguous and the seller could get off paying less than either of you thought. Any unused amount will not lower the purchase price. However, if you have an exact dollar amount or percentage the lender will be able to use it all on your behalf. For example, they might buy-down the rate with any extra funds in the "up to" amount. So, as you can probably tell, I don't like to use "up to" in my offers. But certainly don't assume it will reduce your purchase price by that amount.
Also, keep in mind that concessions usually don't fool a seller. In other words, most sellers realize that paying $15,000 towards you closing costs means they are getting $15,000 less for their property. Seller concessions are valuable to you as a buyer because you can avoid paying extra cash up front. But the Seller is looking at the bottom line.
Good luck with your negotiations and hold your Buyer Agent accountable. My guess is that unless they work for the listing broker, they really want the best for you.
The guidance of an agent will help you to structure your deal quickly and easily. As a buyer, this is free to you, and what you get is a professional, sound offer the first time around, that is taken into consideration much more seriously than if presented on your own. Most sellers look at an unrepresented buyer as just that, an unrepresented buyer; one who knows nothing about the house in question or any other house in the local market. Use your buyer agent as your personal mentor and learn from the experience. this way, when the next time comes around, you can handle it yourself, or choose the convenience of someone else to handle all the coordinations.
Just find yourself a good attorney and mortgage banker. They'll be happy to explain to you how the seller concession works and how it applies.
Please do not listen to these agents. I've bought and sold several homes and realized I always found better prices and properties without them.
Good Luck Pete!
One last thing for you to consider, if you have ditched your buyer's agent, as it appears you have. That agent may feel that they deserve to be compensated for their work. They may first seek compensation from the listing agent in the hope that they can get some or all of the buyer agent fee the listing agent has probably built into his/her fee in the listing contract.
But if your agent is unable to get sufficient compensation from the listing agent, s/he may a) try to get compensated through the Realtor arbitration system, b) try to get compensation directly from you, or c) let it drop. Obviously, you'd be most concerned about "b," which might not ever happen, but could. Depending largely upon whether or not you had a written agreement, you may or may not be legally liable to pay him or her. If you were found liable, you would have to pay above and beyond whatever you paid for the property, as opposed to (probably) having your agent compensated directly by the listing agent or seller as part of the terms of your purchase.
Now here's a dirtly little secret about one segment of the real estate business. If you are dealing directly with the listing agent, s/he is probably salivating over what some in the industry crudely call "double dipping" on the fee; that is, collecting and keeping the fees for both the listing side and the selling side of the transaction. I want to make sure you know that everything is negotiable between client and agent, but the listing agent will probably be within their legal rights to keep both sides of the commission if there is no other agent to compensate. I'm not here to debate the ethics of this practice, but merely to inform anyone who isn't aware of this common practice in most of the country.
So, as a buyer, you may find yourself dealing with a very, very cooperative and friendly listing agent in such a situation. It's in their personal interest to have you choose to not be represented because a) they may be able to manipulate the information you receive to spin things to benefit their seller and drive the price higher and b) the agent may be able to collect more than twice as much commission than if they have to compensate another agent.
Even if the agent is being very helpful to you, it is their legal duty to help the seller get the highest price and most favorable terms. Their only legal obligations to you are to be honest and to disclose any information about the property that may adversely affect its market value. But their duties to their seller-client are, by definition, of a much higher order and priority. I would like to mention that, while I find nothing inherently wrong with the ethics of double-dipping, there is always the potential for a couple of worst-case scenarios in this situation.
One, the agent may forget his/her fiduciary duties to the seller and try to push the deal through even if there are better alternatives for the seller. These could be in the form of a better offer from another buyer or in the form of better terms in the offer before them. The absolute worst-case scenario, though, is if the agent, by design or unintentionally, begins to act as an undisclosed dual agent. That is, if both buyer and seller believe the agent is always acting in their best interests, when in fact the agent says and does things which harm one or the other's interests.
Even if the agent manages to somehow successfully walk the narrow line and not harm either's interests, in Massachusetts, the fact that both parties believed they were represented may constitute a violation of existing agency laws. Before an agent begins to represent the interests of both the buyer and the seller in the same transaction, s/he must get written permission from both parties in order to do so.
These are some of the reasons why Massachusetts requires all licensed agents to give each consumer, at the very first meeting to discuss a particular property, an agency disclosure form that explains what the different types of agency are, and for the agent to spell out in writine what their relationship is to the consumer. With the lone exception of going to open houses, you should have been given one of these forms any time you met an agent for the first time, unless you weren't discussing your interest in a particular property. Even then, at open houses, agents must display a small sign briefly explaining that they represent the seller, not the buyer.
So I am curious why you have chosen to deal directly with an agent whose legal obligation is to be honest and forthright to you, but to try to get you to pay as much money for the property as possible. In my opinion, you would be much better off to work with even an average buyer's agent than to work directly with a listing agent. At least you would have some recourse if you uncovered incompetent behavior that caused you some financial damage.
You have been given some excellent insight by experts in the business.
It's clear to see you are going "solo" on this since you are posing questions that normally within the domain of you buyer's agent. This endeavor is the typical experience when people find themselves in a legal mess because of not having the proper guidance.
Our advice is to take care that you protect yourself by consulting with someone that is familiar with the buying process and speak with a real estate professiional or an attorney. Protect yourself..............
Let me repeat-A BUYER'S AGENT IS PAID BY THE SELLER , unless it is a FSBO and then that has to be worked out , but generally that is how it is done here in Tennessee, I am sure it is different in every state!
I would suggest that you hire a buyer's agent. A Realtor can navigate the maze of options that are available to you (and the seller, which helps you in the long run too)
Good luck, home ownership is so exciting.
In answer to your question about "up to x%", this is usually seen when the buyer asks the seller to specifically to cover a named expense and a cap for that is established.
6% has been a cutoff for some loan guidelines. LIkewise, 3% is a common guideline.