Found an answer to my question while searching around. In case anyone else every wondered about this too, here is portion of a quickenloans.com article on the topic:
"Some may wonder why home sellers would be willing to offer such concessions, as opposed to just lowering the home price. The answer is simple math. A seller most likely can deduct some of the costs associated with seller concessions from their taxes. For example, discount points and real estate taxes most often will be tax deductible (check with a professional tax advisor before finalizing any seller concessions). And selling a home quickly can be a huge savings to the seller, especially if they have moved before they sell. Bills on unsold homes can add up to the thousands very quickly.
But remember, there are restrictions and rules that govern what are legal seller concessions and what may not be. Be sure to check with your real estate agent and mortgage professional about local laws and regulations. An all-too-common, but potentially illegal and unethical activity, is for buyers to inflate the price of a home and ask for "cash under the table" at closing. For example, a buyer may agree to purchase a house for $120,000, but actually only want to pay $110,000. At the closing the seller must bring $10,000 cash to the buyer. Be very careful with "under the table" arrangements such as this. They may not be considered "seller concessions" and may actually be illegal. If presented with such an arrangement, be sure to check with lawyers and tax advisors before accepting.
And the sky is not the limit when it comes to how much a seller can pay with seller concessions. For the most part, the seller can legally cover two to nine percent of the purchase price. The exact amount depends on several factors, including the kind of mortgage the buyer chooses, how the home will be occupied, and the amount for which the home appraises.
Seller concessions can be a useful and appealing tool for sellers to make their homes more attractive to buyers. With guidance from mortgage and real estate professionals, sellers can put together a concession package that benefits both themselves and the buyer. When tax deductions and lower costs associated with a home being on the market a shorter time are considered, seller concessions can actually be a low-cost way to entice buyers to purchase a home."