The security deposits and any prepaid rents would be transferred to you at closing.  

You need to find out what those prepaid items are.

I wanted to use the 6% incentive to pay all of the closing costs and prepaids (about $5400) and use the remaining $3-4K towards the 5% down required which would leave me only about 2-3K out of pocket.

Ballpark...What kind of loan can I expect to get with a credit score of 653/653/684, $120,000 in available cash,to put down, an annual salary of $112,000 (72 in salary, 40 variable comp), have been steadily employed by the same employer for eight years, zero debt including no mortgage, and very low monthly expenses considering I get a prepaid company vehicle complete with free gas, free auto maintenance and repairs, and a free iPhone with data and calling plan.

The most I would take is 2 months, ,,,, first,  last and get same for security deposit.. up front rent is time bomb.. some like it other's don't  I never accept pre paid rent that would go into the next tax year,, to much paperwork... 

With 3.5% down, you're usually ( here anyway) going to be into it for about 10% including closing costs, prepaid tax and insurance escrows, etc. unless you're getting a "rebate" from the lender, which means you're paying a slightly higher interest rate.

So they countered with 55k and nothing for closing.Closing costs + prepaids + down payment are $8720I don't have an estimate for insurance, taxes are $980Repairs are $1k + fenceI'm my property manager, but I'm paying $150 finder fee and $150 for MLS listing (should I bother with MLS).My lender is talking about rolling closing into the loan for a higher %.

Seller can Not pay for your tax/insurance pre paids You will be out off pocket more than 3.5%The numbers are too tight, or actually negative.

Some of that will be the pre-paid costs like insurance and taxes.Idea for coming up with the $1K:Sell some stuff on craigs list or e-bay.Borrow from friends or family.Prosper or lending club.Credit card cash advance.401k loan.An advance from your job.Get a personal loan from a bank or credit union.None of these are great ideas, but we're only talking a grand here, and if this happens like you expect you can pay it back pretty quickly.

You'll need another 5% or so cash for PMI, closing, prepaid insurance and taxes, etc.