Repair Credit or Price Reduction After Inspection? What LA Buyers and Sellers Need to Know

What are your options after a home inspection in Los Angeles?

After a home inspection in Los Angeles, buyers can ask for one of three things: the seller makes repairs before close, the seller provides a credit at closing, or the seller reduces the purchase price. Each option works differently, lender approval requirements vary by loan type, and for LA sellers near Measure ULA thresholds, even a modest price cut can trigger or eliminate a significant transfer tax liability. The right call depends on your loan type, deal structure, and where the negotiation stands.

By Paul Blair | November 2, 2026

The inspection report is back. Now your agent is asking: what do you want to do?

Maybe it's a roof that needs work. Maybe the inspector flagged a cracked foundation stem wall, some deferred maintenance on the HVAC, or a list of smaller items that add up fast. Whatever it is, you have 17 days by default under the California Residential Purchase Agreement to raise your hand and ask for something. How you ask matters.

Here's how each option actually works, and when each one makes sense.

The Three Options After a Home Inspection

Option 1: Seller Makes the Repairs

You submit a written request for the seller to complete specific repairs before close of escrow. If they agree, the work gets done, you verify it with a re-inspection or contractor walk-through, and you proceed.

The issue: you don't always know what you're getting. A seller in a hurry might hire the cheapest contractor available. The repair might be done to minimum code, not to the standard you'd have chosen. If the quality of the work matters to you, weigh this carefully before asking for it.

Sellers dislike this option in a soft market because it forces them to manage contractors on a deadline, spend money on a home they're leaving, and often accept a lower-quality outcome than they'd get with more time.

Option 2: Credit at Closing

Instead of fixing anything, the seller gives you a dollar-for-dollar credit at closing that reduces what you owe. The credit shows up on the Closing Disclosure and lowers your out-of-pocket costs.

This is usually the cleanest option when the repairs are things you want to handle yourself after moving in. You pick the contractor. You decide the scope. The seller avoids the hassle, and you get money you can actually put toward the work.

One important detail: a credit is not cash in your pocket. It reduces closing costs or other amounts on your settlement statement. Your lender has to approve it, and there are caps on how much you can receive based on your loan type and down payment.

Option 3: Price Reduction

The seller drops the sale price. This is simpler to understand but often less valuable to the buyer than it sounds.

Here's why: a $10,000 price reduction on a 30-year loan at current rates reduces your monthly payment by roughly $55 to $65. That's it. If you're trying to fund a $10,000 roof repair, a price reduction doesn't get you there, because most of that money disappears into a lower loan balance rather than going to your contractor.

Price reductions do lower your loan amount, which can help if you're at the edge of a qualifying threshold. They also affect your property tax base, since California calculates taxes on the recorded sale price. But as a pure repair-funding mechanism, they're usually less efficient than a credit.

How Lenders Cap Repair Credits

This is where buyers on conventional loans and jumbo loans get surprised.

Lender-imposed caps on seller credits are based on your loan-to-value ratio. For conventional loans backed by Fannie Mae and Freddie Mac:

• Less than 10% down (LTV over 90%): seller credits capped at 3% of the purchase price
• 10% to 25% down (LTV between 75% and 90%): capped at 6%
• More than 25% down (LTV below 75%): capped at 9%

FHA loans cap seller contributions at 6% regardless of down payment.

Jumbo loans, which are common across the Hollywood Hills, Beverly Hills, and Bel Air price ranges, don't follow Fannie/Freddie guidelines. Each lender sets its own cap. Before your seller agrees to any credit amount, confirm the cap with the buyer's lender. If the credit exceeds the cap, it needs to be renegotiated before closing, not after.

The Measure ULA Factor for LA Sellers

In most cities, a price reduction is just a smaller number on the contract. In Los Angeles, it can mean something much more significant.

Measure ULA is the City of LA's transfer tax that applies to high-value sales. The current thresholds are 4% at $5,400,000 and above, and 5.5% at $10,900,000 and above, with both tiers indexed annually. For a full breakdown, see our Measure ULA seller guide.

Here's how inspection negotiations can trigger ULA consequences: if you're a seller at $5,500,000 and you agree to a $200,000 price reduction, your new price is $5,300,000. You just dropped below the 4% threshold and avoided $216,000 in transfer tax. That's a price reduction that pays for itself many times over.

The reverse matters too. A buyer asking for a $100,000 credit on a $5,450,000 sale might generate a better outcome for the seller than a $100,000 price reduction, because the price stays above the threshold either way and the ULA liability doesn't change. But if the seller is right at the threshold and a credit-plus-price-adjustment pushes them below it, the math shifts entirely.

Always run the numbers on where the adjusted price lands relative to the ULA tiers before finalizing any inspection negotiation on a City of LA property.

If you're navigating this on a property in Los Angeles or across the Westside, reach out at greysq.com/contact. We can help you work through the credit structure, the ULA exposure, and what the final numbers mean for your position.

How the CAR Request for Repair Works

Under the California Residential Purchase Agreement, the buyer submits a Request for Repair (C.A.R. Form RR) to the seller. The seller has three options in response: agree to the full request, counter-propose a different amount or scope, or reject the request entirely.

The buyer can then accept the counter, push back again, or elect to remove the contingency and proceed without any concession. If no agreement is reached, the buyer can back out and recover their earnest money deposit, as long as they're still within the 17-day contingency window.

One thing both sides get wrong: submitting the repair request resets the negotiation. It doesn't obligate either party to the terms of the original contract. Use it strategically.

Which Option Actually Works Best?

There's no universal answer, but here are the patterns that come up most often.

For buyers on jumbo loans in the $2M to $10M range: a credit is almost always better than asking for repairs, because the seller's repair job rarely meets the buyer's expectations. Confirm the cap with the lender first.

For sellers near a Measure ULA threshold: run the ULA math before agreeing to any price reduction. A credit of the same dollar amount keeps the price where it is and avoids a potential six-figure tax consequence.

For sellers in a soft market: credits tend to close deals faster than negotiating over specific repairs, because they move the dispute off the inspection report and back to the numbers.

For buyers on FHA or conventional loans with seller concessions: don't negotiate a credit that exceeds your loan's cap. Catch the math early, not at the closing table.

Frequently Asked Questions

Can a seller just say no to a repair request in California?

Yes. Under the C.A.R. Residential Purchase Agreement, a seller is not required to make repairs or offer credits after an inspection. They can reject the request outright. At that point, the buyer decides whether to proceed as-is, renegotiate, or back out during the contingency period. The seller's refusal doesn't automatically kill the deal.

Does a repair credit reduce my closing costs as a buyer?

It reduces your out-of-pocket expenses at closing, but the credit is applied to closing costs or prepaid items on the Closing Disclosure rather than paid out as cash. If the credit exceeds your remaining closing costs, the excess may not be refundable. Confirm with your lender how the credit gets applied before you negotiate the amount.

How long does a buyer have to ask for repairs in California?

The default inspection contingency period under the C.A.R. Residential Purchase Agreement is 17 days from acceptance. Buyers need to submit any repair request in writing before that window closes, or they lose the right to use the inspection findings as a basis for renegotiating or backing out. The window can be shortened or extended by mutual agreement.

Is a repair credit better than a price reduction for a buyer?

For most buyers, a credit is more efficient than a price reduction because it delivers usable funds at closing rather than a marginally lower loan balance. A $10,000 price reduction saves roughly $55 to $65 per month on a 30-year mortgage at current rates, while a $10,000 credit gives you money directly applicable to the repair cost. The exception is if a lower price helps you qualify for the loan or affects your property tax calculation meaningfully.

What happens if the repair credit exceeds my lender's cap?

The excess credit doesn't transfer to you. Lenders set caps on seller contributions as a percentage of the purchase price based on your down payment and loan type. If the agreed credit exceeds the cap, the closing disclosure won't reconcile. You'll need to restructure the credit, renegotiate the purchase price, or find another way to account for the overage. This needs to be caught before escrow, not the day before closing.

The right post-inspection move depends on your loan, your timeline, and what you're trying to accomplish. In LA, where the price lands relative to Measure ULA thresholds can change the outcome significantly for sellers. Walk through the options with someone who knows the local market before you commit to an approach.

About Paul Blair Paul Blair is the founder and broker of Grey Square, a virtual real estate brokerage representing buyers and sellers across Dallas, Los Angeles and Houston. With 22 years in the business, Paul works the full range of the market, from luxury homes in the Park Cities and Preston Hollow to estates in the Hollywood Hills and across the Westside. Connect with Paul and the Grey Square team at greysq.com. TX TREC #9011505 · CA DRE #01792671.