Seller credit will go towards closing costs. However, the amount of seller credit can be limited by banks. For conventional mortgages on investment properties, it's usually 2%.
Because seller credits are not taken off of the sales price, the seller will still pay a commission on that amount to the broker. Seller credits do not impact the buyer any differently before or after an appraisal and shouldn't impact the appraisal either. That being said, if a property doesn't appraise, there is a good chance that seller would want to reduce the seller credit/purchase price.
As an example, assume a property purchase price is $300k, there is $6k in seller credit, but it appraises at $298k. It is likely that the seller will want to drop to a $298k purchase price with $4k in credits (or that they will at least try this). The buyer of course will want to drop to the appraised value of $298k and keep the $6k in credits.