Los Angeles seller guide
Should I Give the Buyer a Repair Credit or Make the Repairs?
Give a closing credit when the buyer's loan allows it and the defect is not something the lender requires fixed; make the repairs to control the contractor, or when the buyer's lender or insurer needs the work done. The buyer's loan limits a credit: Fannie Mae allows 3%, 6% or 9% of the lower of price or appraised value, by loan to value (2% on investment property), FHA allows 6%, and both loans also tie a credit to the buyer's actual closing costs.
The right answer to a repair request depends on the buyer's loan, the appraisal, the contractor's schedule and the final inspection. This article compares the three answers, shows where loan rules cap a credit, and runs the dollars on a sample sale. The C.A.R. purchase agreement described here is a published sample of the 12/18 revision, an older form. Later revisions renumber paragraphs and can change periods and form names, so match the wording in your own contract, not the paragraph numbers.
The short answer
In a Los Angeles sale, a repair credit moves the work and the risk to the buyer, but the buyer's loan type limits how large it can be. Repairs keep you in control of quality and permits, but they add schedule risk before closing. A price reduction is not a concession, so no credit cap applies, though it lowers the recorded price. The buyer's lender should confirm which fits the loan.
Get your number before you answer the buyer
Get a value range for your Los Angeles home, or call to talk through whether repairs, a credit or a price reduction fits the buyer's request.
How Does the Request for Repair Process Work in a Los Angeles Sale?
In a Los Angeles resale written on the C.A.R. residential purchase agreement, repair talks begin after the buyer's inspections. The buyer typically has 17 days to inspect and investigate the property, including its insurability (California Department of Real Estate, DRE Reference Book Chapter 20, checked October 28, 2026). That window is a fill-in on the contract, so your number of days may differ.
The buyer's agent usually sends the C.A.R. Request for Repair (RR), which DRE lists among the standard forms used in a purchase transaction (California Department of Real Estate, DRE Reference Book Chapter 20). The RR names each item and the remedy the buyer wants: a repair, a credit, or a price change.
You are not required to respond, but you usually should, and you answer in writing. The C.A.R. sample purchase agreement (revised 12/18) says the seller has no obligation to agree to or respond to the buyer's requests, and it names C.A.R. Form RRRR for the response (C.A.R., California Residential Purchase Agreement, sample revised 12/18, paragraph 14B(2), checked October 28, 2026). Your choices are to agree to everything, agree to some items, decline, or counter with a different remedy. A written counter keeps the deal moving. If you will not correct an item, the buyer must either proceed or cancel (California Department of Real Estate, DRE Reference Book Chapter 20).
Silence does not end the deal. The same sample form says the buyer's contingency continues past the investigation period until the buyer removes it or you cancel, and to cancel you must first deliver a Notice to Buyer to Perform (C.A.R. Form NBP) (C.A.R., California Residential Purchase Agreement, sample revised 12/18, paragraphs 14B(4) and 14D(1)).
Declining has a second cost. If the buyer walks, material defects the report identifies become things you know about, and you should expect to disclose them, or provide the report, to the next buyer, so declining rarely makes the problem go away.
What a clear response includes
- Item by item answers. Name each inspection finding and say repair, credit, reduction or decline.
- Who performs the work. State whether you hire the contractor or the buyer does.
- Dollar limits and dates. Put any cap and completion date in writing.
Agreeing to a repair is a promise to perform it, and agreeing to a credit is a promise to pay it through escrow. Escrow is a neutral third party that holds documents and funds in trust until the contract conditions are met (California Department of Real Estate, Surviving the Real Estate Escrow Process in California, checked October 28, 2026), so the agreement must be written before escrow can act on it.
Should I Make the Repairs or Give the Buyer a Credit?
The decision turns on who you want holding the risk after you sign. When you make repairs, you hire the contractor, set the scope, and answer for the finished work. When you give a credit, the buyer chooses the contractor and the timing. Your obligation for the agreed items ends when escrow applies the credit at closing; your disclosure duties for what you know do not.
Repairs tend to suit items a lender or insurer may care about, such as an active roof leak, exposed wiring, or a failed sewer lateral. A credit tends to suit large or uncertain items, such as foundation work or a re-pipe, where the buyer wants to pick the contractor or plan the work around a remodel, unless the appraiser flags the item as a safety, soundness or structural item. In that case a conventional loan sold to Fannie Mae requires the lender to verify the repair is complete before the loan is sold (Fannie Mae, Selling Guide B4-1.2-05, checked October 28, 2026), so a credit cannot replace the repair.
| Option | What you control | What the buyer controls | Main risk |
|---|---|---|---|
| Make the repairs | Contractor, scope, cost, quality | Acceptance at the final inspection | Delays, poor workmanship, missing permits |
| Closing credit | The dollar amount you agree to | Contractor, scope, timing after closing | Lender limits on seller credits |
| Termite Section 1 work | Already set by the contract or WPA; you control the contractor if you pay | Whether to accept a credit instead of Section 1 work, if the lender allows it | The lender may require clearance before funding, and a credit in place of the work may count toward the lender's limits |
| Price reduction | The new contract price | Loan amount and later repairs | Lower recorded sale price for neighborhood comparables |
Where do termite findings fit?
Termite findings are often among the first repair-or-credit items. Under the standard C.A.R. purchase agreement, the buyer's pest control report is separated into Section 1, for evident infestation or infections, and Section 2, for conditions likely to lead to infestation or infection (C.A.R., California Residential Purchase Agreement, sample revised 12/18, checked October 28, 2026).
The contract may specify who pays for the work a registered structural pest control company needs before it certifies the home free of evidence of active infestation in the accessible areas, and the C.A.R. Wood Destroying Pest Inspections and Allocation of Cost Addendum (WPA) can assign responsibility for those repairs. DRE adds that lenders may require that certification before funding (California Department of Real Estate, DRE Reference Book Chapter 20). Ask the buyer's loan officer whether Section 1 clearance is a condition of the loan, because that answer decides whether a credit can replace the work.
Two payments are easy to confuse here. When the contract or WPA has you pay the pest company directly through escrow, that is a seller cost under the contract, and Fannie Mae exempts typical fees and costs a seller pays under local custom, which it calls common and customary, from its maximum financing concessions (Fannie Mae, Selling Guide B3-4.1-02 Interested Party Contributions, checked October 28, 2026). A credit to the buyer in place of the work is a different payment, and the lender may count it toward the limits explained below. Whether a charge is customary is the lender's call.
Lenders do not treat a credit and a repair as interchangeable. On a conventional loan sold to Fannie Mae, repairs that affect safety, soundness or structural integrity, which Fannie Mae says can include foundation settlement, water seepage and active roof leaks, must be verified complete before the loan is sold, while the lender may choose to escrow minor items for after closing (Fannie Mae, Selling Guide B4-1.2-05 Requirements for Verifying Completion and Postponed Improvements, checked October 28, 2026).
On FHA and VA purchases, the standard contract gives the buyer 17 days to give written notice of lender-required repairs (California Department of Real Estate, Reference Book Chapter 20). The C.A.R. sample says you have no obligation to pay for or satisfy those lender requirements unless you agree in writing (C.A.R., California Residential Purchase Agreement, sample revised 12/18, paragraph 3D(3), checked October 28, 2026), but if the required work is neither done nor escrowed, the lender may not fund the buyer's loan.
On an FHA loan, the lender must comply with the Handbook's repair requirements when the appraisal calls for repairs, and the lender may set up a repair escrow only for work that cannot be finished before closing, and only if the home is habitable and safe at closing (FHA, Single Family Housing Policy Handbook 4000.1, Update 18 issued August 12, 2026, checked October 28, 2026), so a credit rarely replaces required work.
VA's Notice of Value lists the items that need repair to meet VA minimum property requirements (VA, VA Home Loan Guaranty Buyer's Guide, checked October 28, 2026), and the buyer's loan officer can say whether that lender will close with a repair escrow.
Ask the buyer's loan officer early whether any appraisal-required repair must be finished before funding or whether the lender will accept a repair escrow, because that answer can decide whether a credit is even an option for that item.
How do you size a credit?
Older Los Angeles homes carry uncertain scope, so start from numbers instead of an argument. Compare the buyer's bid with a bid from your own licensed contractor for the same written scope, and look at differences in scope, materials and permits before comparing totals. A credit near the lower figure, or one capped at a stated amount with the buyer taking responsibility for the work, keeps the talks tied to a number both sides can see.
Check the total against the lender limit before you agree. The sample purchase agreement says a credit above what the buyer's lender allows is reduced to the allowable amount, with no automatic price adjustment unless the parties agree otherwise in writing (C.A.R., California Residential Purchase Agreement, sample revised 12/18, paragraph 3J(5), checked October 28, 2026). For minor aging-system items, the sample form also lets the parties assign the cost of a one-year home warranty plan to either side (C.A.R., California Residential Purchase Agreement, sample revised 12/18, paragraph 7D(10)). Ask the buyer's loan officer whether a seller-paid warranty counts toward the lender limit.
Weigh your repair options
Send your inspection report and the buyer's Request for Repair, and talk through repairs, a credit or a price reduction before you respond.
How Do Lender Limits Cap a Repair Credit in California?
The buyer's loan, not the repair form, sets the ceiling. A seller credit that reaches the buyer's loan file is usually treated as an interested party contribution. Fannie Mae caps financing concessions on a principal residence or second home at 3% when loan to value is above 90%, 6% when it is 75.01% to 90%, and 9% when it is 75% or less, with investment property capped at 2% (Fannie Mae, Selling Guide B3-4.1-02 Interested Party Contributions, checked October 28, 2026). Fannie Mae calculates those limits on the lower of the sales price or the appraised value, so a low appraisal shrinks the dollar cap.
FHA works differently. FHA Handbook 4000.1 lets interested parties, including sellers, contribute up to 6% of the sales price toward the borrower's origination fees, other closing costs, prepaid items and discount points, and treats amounts above that, or above actual costs, as an inducement to purchase (FHA, Single Family Housing Policy Handbook 4000.1, Update 18 issued August 12, 2026, checked October 28, 2026).
| Loan type | Condition | Seller contribution limit |
|---|---|---|
| Fannie Mae, primary or second home | Loan to value above 90% | 3% |
| Fannie Mae, primary or second home | Loan to value 75.01% to 90% | 6% |
| Fannie Mae, primary or second home | Loan to value 75% or less | 9% |
| Fannie Mae, investment property | Any loan to value | 2% |
| FHA | Percent of sales price | 6% |
On a financed purchase, two ceilings apply at once: the percentage limit and the buyer's actual closing costs, because Fannie Mae says financing concessions must be equal to or less than the sum of the borrower's closing costs. Any credit already in your accepted offer counts toward the same limit, so add the two together before you agree to more. Excess credit does not simply disappear. Fannie Mae treats concessions above its limits, and any amount above the buyer's closing costs, as sales concessions deducted from the sales price for loan purposes, with loan to value recalculated on the lower figure (Fannie Mae, Selling Guide B3-4.1-02).
Fannie Mae calculates purchase loan to value on the lower of the sales price or the current appraised value (Fannie Mae, Selling Guide B2-1.2-01 Loan-to-Value Ratios, checked October 28, 2026). Freddie Mac loans, VA loans and portfolio loans follow their own rules, so the buyer's loan officer should put the limit in writing.
Check what your credit can be
Get your number and see how the buyer's loan type may limit a seller credit before you commit to an amount.
Is a Price Reduction Better Than a Repair Credit?
A price reduction changes the contract price instead of adding a line to the settlement statement. The buyer's loan is built from the sales price, so the buyer finances less, and because a lower price is not a concession, no credit cap applies to it.
A lower price can also help with a tight appraisal. Fannie Mae calculates loan to value on the lower of the sales price or the appraised value (Fannie Mae, Selling Guide B2-1.2-01), so bringing the price in line with value can keep the buyer in the same loan to value tier and the same allowed concession.
The downside is the record: a lower price recorded at closing becomes a comparable sale that appraisers will see when your Los Angeles neighbors sell. A credit does not fully hide the discount, because Fannie Mae requires appraisers to report seller concessions on comparable sales when the information is reasonably available and to adjust for them (Fannie Mae, Selling Guide B4-1.3-09 Adjustments to Comparable Sales, checked October 28, 2026).
The seller's side usually favors a cut as well. Commission and the documentary transfer tax are percentage-based. The county rate is $0.55 per $500 of value (County of Los Angeles, Documentary Transfer Taxes, checked October 28, 2026), and inside the City of Los Angeles an additional city tax of $2.25 per $500 applies (County of Los Angeles, Documentary Transfer Taxes). Who pays transfer tax is set by your contract and local custom.
As an illustration, a $20,000 price cut at an assumed 5% total commission saves $1,000 in commission. If you pay the transfer tax, it also saves $22 of county tax and $90 of City of Los Angeles tax, about $1,112 in all. The cut costs you about $18,888 net, while a $20,000 credit costs the full $20,000. A seller net sheet shows the real numbers for your sale.
As a rule, choose a reduction when lender limits are tight and the issue is permanent, a credit when the buyer plans the work after closing and the loan allows it, and repairs when the defect affects insurability or loan approval.
How Do a Credit and a Price Cut Compare in Dollars?
The sample below uses the Los Angeles County median price for existing single-family homes, $994,670 in September 2026 (C.A.R., September home sales and price report, checked October 28, 2026), an 80% conventional loan, and an assumed $25,000 in buyer closing costs. Every figure is illustrative, not a quote for any property.
| Scenario | Price | Loan at 80% | Down payment | Buyer cash to close |
|---|---|---|---|---|
| No concession | $994,670 | $795,736 | $198,934 | $223,934 |
| $20,000 seller credit | $994,670 | $795,736 | $198,934 | $203,934 |
| $20,000 price cut | $974,670 | $779,736 | $194,934 | $219,934 |
The Fannie Mae 6% cap on this price is about $59,680, but the buyer's closing costs are the lower ceiling, so the $20,000 credit fits, while any amount above the closing costs would be treated as a sales concession. A credit cuts the buyer's cash to close by the full $20,000. The price cut lowers the down payment by only $4,000, the 20% share, and trims the loan by $16,000, so the buyer's cash to close falls by $4,000 on the cut against $20,000 on the credit.
Who Controls Repair Quality and Permits in Los Angeles?
If you make the repairs, quality control is yours, and the buyer's recourse is the contract. Hire a contractor licensed by the California Contractors State License Board for the trade involved, get a written scope, and keep the invoice. Work done by a handyman without a permit can surface later in the buyer's inspection or in the permit history.
Los Angeles homes raise a short list of repeat items. Sewer laterals in older neighborhoods can have root intrusion, offsets or aging clay pipe, which a camera scan reveals. Roof items include flashing leaks and end-of-life roofs, and insurers sometimes ask about roof condition before they bind coverage.
Smoke alarm, carbon monoxide device and water heater bracing work is handled differently from other repairs. The sample purchase agreement lets the parties choose who pays to install them where the law requires them, and has you give the buyer written statements of compliance before close of escrow unless you are exempt (C.A.R., California Residential Purchase Agreement, sample revised 12/18, paragraph 7B(1), checked October 28, 2026; California Department of Real Estate, Reference Book Chapter 20), so completing that work is usually simpler than crediting it.
Some presale requirements come from the city. Inside the City of Los Angeles, Section 96.300 of the Municipal Code requires the seller to apply for a Report of Residential Property Records and deliver it to the buyer before the agreement of sale or before close of escrow, and the building department's seller page lists further items such as water conservation devices and a seismic gas shut-off valve (City of Los Angeles Department of Building and Safety, Requirements When Selling, checked October 28, 2026).
The sample purchase agreement lets the parties choose who pays for minimum mandatory government inspections, reports and retrofits that the law makes a condition of closing, and says the buyer receives a copy of any point-of-sale inspection report (C.A.R., California Residential Purchase Agreement, sample revised 12/18, paragraph 7B(2)).
A credit does not remove a government requirement, because the city decides what is required and when. Other cities and unincorporated areas have their own rules, so ask your escrow officer which apply to your address.
Permits matter because your city's building department issues the permit and signs off the inspection: LADBS inside the City of Los Angeles, the city's own department in places like Pasadena, Glendale or Burbank, and LA County Public Works in unincorporated areas. A finaled permit is stronger proof than a contractor's invoice. Confirm whether the work needs a permit before you promise it in the RR response, because permit timing can outlast escrow.
If repair work uncovers a new material defect, such as a contractor opening a wall and finding damage, you may need to amend your disclosures, and a material amendment delivered after the offer reopens a short cancellation window. If a required disclosure or material amendment is delivered after the buyer signed the offer, the buyer may terminate in writing within 3 days after in-person delivery, or 5 days after delivery by mail or agreed electronic delivery (CA Civil Code, section 1102.3, checked October 28, 2026).
A credit hands quality and permits to the buyer. Repairs keep them with you, so budget time for the building department as well as the contractor.
When Does Timing Make a Credit Safer Than Repairs?
Timing often favors a credit over repairs. The buyer's investigation period typically runs 17 days (California Department of Real Estate, Reference Book Chapter 20), and contingency removal is in writing, typically on the C.A.R. Contingency Removal form (CR). If a party does not perform, the other may give a Notice to Perform, which is typically required before cancelling the agreement and escrow.
Repairs need contractor availability, materials and sometimes a permit inspection. Roofing, foundation and sewer lateral work in Los Angeles can book out. An unfinished repair is a real exposure, because the buyer has the right to make a final inspection within 5 days prior to closing to confirm agreed repairs are completed (California Department of Real Estate, Reference Book Chapter 20). Unfinished work can mean a holdback if the buyer's lender allows it, a late credit or a delayed closing.
A credit needs lead time too. Get a credit amendment to the buyer's lender as soon as it is signed, because the lender has to document it and update the closing figures. FHA requires the lender to document interested party contributions on the sales contract or another binding document and on the Closing Disclosure, and to give the appraiser a copy of any separate document (FHA, Single Family Housing Policy Handbook 4000.1, Update 18 issued August 12, 2026), and Fannie Mae's lender checklist has the lender provide the appraiser with the interested party contributions (Fannie Mae, Selling Guide B3-4.1-02). A credit agreed late can delay closing too.
When you choose repairs, build timing into the response. Name a licensed contractor, set a completion date well before the final inspection, cap the cost, and say what happens if the work runs over.
What Receipts and Verification of Property Condition Should You Keep?
Paper closes the loop on repairs. DRE lists the Verification of Property Condition (VP) among the standard C.A.R. forms used in a purchase transaction (California Department of Real Estate, Reference Book Chapter 20). Check the repairs paragraph of your purchase agreement. The standard C.A.R. form typically requires repairs to meet permit, inspection and approval requirements, and requires you to give the buyer invoices, paid receipts and a written statement of the work before the final verification (C.A.R., California Residential Purchase Agreement, sample revised 12/18). The sample agreement's final verification paragraph refers to C.A.R. Form VP (C.A.R., California Residential Purchase Agreement, sample revised 12/18, paragraph 15).
| Document | Who supplies it | What it shows |
|---|---|---|
| Contractor invoice and receipt | Contractor to seller | What was done, when, and what it cost |
| Permit sign-off | Building department through the contractor | The work was inspected and finaled |
| License number and warranty | Contractor | Who did the work and what they stand behind |
| Signed credit amendment | Both parties, with copies to escrow and the buyer's lender | The agreed credit amount and terms |
Deliver copies to the buyer's agent and escrow, and keep the originals. The buyer's final inspection is not a contingency of the sale. DRE describes it as a check that the property is in the same condition, agreed repairs are completed, and the seller has complied with other contractual obligations (California Department of Real Estate, Reference Book Chapter 20).
For a credit, receipts matter less than the written amendment. Escrow follows signed instructions, not verbal promises, so confirm the credit line appears on your settlement statement before you sign.
Close out repairs cleanly
Talk through the paperwork that protects you after you agree, from invoices and permits to the written amendment.
Frequently asked questions
Can the buyer ask for a credit larger than the closing costs?
A buyer can ask, but on a Fannie Mae loan any amount above the buyer's actual closing costs is treated as a sales concession and deducted from the sales price for loan purposes, which can shrink the buyer's loan. FHA treats contributions above actual costs as an inducement to purchase. Restructure the excess as a price reduction. A cash buyer faces no lender limit, so the cap becomes a negotiation point.
Do I have to agree to every item on the Request for Repair?
No. The sample C.A.R. purchase agreement says the seller has no obligation to agree to or respond to the buyer's requests, so you may agree, agree in part, decline, or counter with a different remedy. Declining carries a cost, because the buyer may use the remaining investigation period to renegotiate or cancel. Which deadlines apply depends on the dates in your own contract.
Does the buyer receive a repair credit as cash?
Typically no. Escrow applies a credit as a reduction on the buyer's side of the settlement statement, and lenders generally want it directed to closing costs, prepaid items or discount points rather than paid out to the buyer. Cash back at closing can raise lender objections. Your escrow officer and the buyer's lender decide how the line item appears on the final documents.
Is a pre-listing inspection worth it before I list in Los Angeles?
Often, especially for older homes. An inspection before listing lets you see roof, foundation, electrical and sewer issues before the buyer does, collect contractor bids, and choose repairs on your own schedule. You must still disclose what you know, and buyers can order their own inspections during their investigation period.
Who pays for a sewer lateral scan or repair?
The contract and the negotiation decide, not a fixed rule. In a Los Angeles resale the buyer often orders a sewer line video scan as part of their inspections, and any repair or credit then becomes part of the Request for Repair negotiation. If a city or county requirement applies to your property, your escrow officer or agent can tell you what the local jurisdiction expects.
What if agreed repairs are not finished by the final walkthrough?
The buyer may use the final inspection to confirm agreed repairs are completed, so unfinished work can delay closing or lead to a negotiated holdback, if the buyer's lender allows it, or a credit. Escrow needs written instructions before it holds funds or adjusts the statement. If a contractor slips, get any agreed fix in writing before the walkthrough.
Can the buyer hire their own contractor after closing instead?
Yes. With a credit or a price reduction, the buyer can hire their own contractor after closing and controls scope, quality and permits. Your obligation for the agreed items ends when escrow applies the credit, but your disclosure duties for what you know do not. Repairs a lender requires are different, so ask the buyer's loan officer whether they must be finished before funding.
What happens to the defects if the buyer cancels?
Material defects the buyer's inspection report identifies are now things you know about, and you should expect to disclose them, or provide the report, to the next buyer even if you declined to repair them. Keep the buyer's report with your own disclosure file, and price the next buyer's repair request into your decision now.
Ready to answer the repair request?
Get a value range for your home, then see what is selling nearby or talk the repair, credit or price reduction through with Justin before your deadline.
About the author
Justin Borges
REALTOR® | CA DRE #01940318
Justin writes LA Metro Home Finder’s guides to 30+ communities across the San Gabriel Valley, Northeast LA, and greater Los Angeles, and has closed $200M+ in career sales with a 106% average list-to-sale ratio.
Justin has held an active California DRE salesperson license since October 2013. View Justin’s author profile.
This guide is educational and is not legal, tax, title, lending, or insurance advice. Contract forms, statutes, and lender rules change. Confirm the terms that apply to your sale with your escrow officer, title officer, lender, or a California real estate attorney.
