Mortgage Loan Originator (MLO) Licensing Practice Test

The correct answer is that seller concessions are based on the sales price of the property. Seller concessions, sometimes referred to as seller contributions, involve the seller agreeing to cover certain costs associated with the transaction, such as closing costs or points, which can help facilitate the sale.

Since these concessions are typically expressed as a percentage of the sales price, they directly correlate to the total amount for which the home is being sold. This means that if the sales price increases, the maximum allowable seller concession also increases, providing more potential benefit to the buyer in covering their costs.

Understanding this aspect is important because it influences how seller concessions can be negotiated and used as a strategic element in real estate transactions. The other choices do not align with the mechanics of how seller concessions are calculated or applied in the context of a real estate transaction.