The Seller Credit Play
Offer more than asking to get cash back at closing — same net to them, less cash from you.
- Difficulty
- Moderate
- Time to result
- ~weeks to results
- Steps
- 4
- Confidence
- 90%
A seller credit is cash the seller gives back to the buyer at closing, reducing the seller's profit. The naive objection is obvious: why would a seller hand you part of their proceeds? Leonard's structure answers it. If a house is listed at $100k and a rival offers $100k clean, your $100k offer with a $10k credit nets the seller only $90k and loses. But offer $110k with a $10k credit and the seller still nets $100k — identical to the competing offer — while you walk away from closing with $10k toward your costs. You are effectively financing your closing costs into the mortgage. Leonard is explicit that this is what is happening and considers it an acceptable trade when cash is the binding constraint. He has used it on every single real estate deal he has done, house hacks and traditional rentals alike.
Origin
Leonard needed a way to buy properties as a young investor without the cash reserves of a conventional buyer. Rather than accept the down-payment barrier as fixed, he worked out that the seller's decision variable is net proceeds, not sticker price — and that a price increase paired with an equal credit is neutral to them and transformative to him. He has applied it to every deal since.
Core principles
- 01Sellers care about their net proceeds, not the headline price.
- 02Raising the offer price to fund a credit leaves the seller whole while freeing your cash.
- 03Cash-to-close, not purchase price, is the real barrier for most first-time buyers.
- 04This is financing your closing costs — acceptable when cash is your binding constraint.
- 05It works in competitive markets precisely because it does not reduce the seller's take.
How to run it
- 1
Understand what a seller credit actually is
A seller credit is cash back to you at closing, taken out of the seller's proceeds. It can be applied toward closing costs or your down payment, directly lowering the cash you must bring to the table.
- 2
See why a naive credit request loses
Offering $100k with a $10k credit against a rival's clean $100k means the seller nets $90k from you and $100k from them. You lose the deal every time.
Watch out Never request a credit without adjusting the price — in a competitive market it is simply a worse offer.
- 3
Gross up the offer by the credit amount
Offer $110k with a $10k seller credit. The seller nets $100k — identical to the competing clean offer — but you receive $10k at closing.
Pro tip Leonard's standing practice: always offer a little above asking specifically to get cash back.
- 4
Apply the credit and preserve reserves
Route the credit to closing costs or the down payment. On his $400k duplex this took cash-to-close from ~$23k down to $12-13k, letting him keep $7k in reserves.
Watch out Recognize you are financing the closing costs into the loan. Leonard judges this acceptable when you do not have a lot of money — but it is a real trade, not free money.
In the wild
Leonard's teaching case: a house is listed at $100,000. A competing buyer offers $100,000 clean. If you offer $100,000 with a $10,000 seller credit, the seller nets $90,000 from you versus $100,000 from them — you lose. Instead you offer $110,000 with a $10,000 seller credit. Their net gain is $100,000 from either buyer.
→ The seller is indifferent between the offers, but you leave closing with $10,000 toward your closing costs, materially cutting the cash you needed to get into the deal.
On his third house hack, a $400,000 duplex, Leonard needed roughly $23,000 to close. He negotiated a $10,000 seller credit into the deal.
→ Cash to close dropped to $12,000-13,000 on a $400,000 asset — meaning someone with $20,000 saved could buy it and still hold $7,000 back for reserves.
Common mistakes
Asking for a credit without raising the price
This is the mistake that makes people conclude seller credits don't work. Without the gross-up, you are just asking the seller to accept less than a competing bid, and in any competitive market you will lose.
Pretending it isn't financing
Leonard is upfront that you are financing your closing costs into the mortgage. If you tell yourself it's free money you will over-lever and misjudge the deal's real economics.
Ignoring the appraisal ceiling
The grossed-up price still has to be supportable. If the higher contract price will not appraise, the structure collapses and you are back to bringing cash.
Is it for you?
Best for
Cash-constrained buyers in competitive markets who can service the mortgage but cannot cover the full down payment and closing costs at once.
Not ideal for
Buyers who already have ample cash, deals where the appraisal will not support an above-asking price, or anyone uncomfortable financing closing costs into the loan.
From the transcript
“a seller credit is basically in the simplest term is when the seller when you buy a house the seller gives you cash back at…”
“you could technically offer a hundred and ten thousand with a ten thousand dollar seller credit now their net gain is still a hundred from…”
“that's what i've always done is i've always offered a little bit more than asking so that i can get some cash back in that…”
From the episode
Robert Leonard: Millennial Investing and House Hacking
Robert Leonard