Those new to VA loans and home buying in general soon learn about the ins and outs of negotiating the price of a home to be purchased with a VA mortgage.

Housing markets go through phases depending on where they are located. Some phases are known as a “buyer’s market” where the buyer seems to have the upper hand when because there are more houses for sale than there are buyers to purchase them. Others are known as a seller’s market where the reverse may be true.

But no matter what kind of market you’re trying to do business in, there are tools buyers and sellers alike can use to sweeten a deal and make the sale. VA borrowers should understand the concept of seller concessions before trying to negotiate with a house seller. You’ll negotiate with more confidence knowing what concessions are, how they can improve the deal, and the limitations on concessions.

The VA defines seller concessions as “anything of value added to the transaction by the builder or seller for which the buyer pays nothing additional and which the seller is not customarily expected or required to pay or provide.”

The right seller concessions could make the sale price easier to accept, or act as a way to encourage the borrower to accept the sales price based on consideration given. VA rules say seller concessions may include the seller paying the VA loan funding fee, pre-paying property taxes and/or insurance, even “gifts” to include appliances or furnishings like a television or microwave.

Seller concessions do not include paying closing costs or paying points “as appropriate to the market.” This is an important detail because the VA limits the value of all seller concessions. According to the VA Lender’s Guide, “Any seller concession or combination of concessions which exceeds four percent of the established reasonable value of the property is considered excessive, and unacceptable for VA-guaranteed loans.”

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