09/27/2026
๐ก YOUR BUYER GOT A REPAIR CREDIT โ BUT CAN THEY ACTUALLY AFFORD THE REPAIRS?
Getting a seller to agree to a repair credit can feel like a win after an inspection.
But before everyone celebrates, thereโs an important question that sometimes gets overlooked:
Will the buyer actually have enough money after closing to make the repairs?
Because a seller credit and cash for repairs are not necessarily the same thing.
Hereโs an example.
A buyer is purchasing a $500,000 home with 5% down using a conventional loan.
The original contract already includes a $6,000 seller credit toward closing costs.
Then the inspection comes back.
๐ Active roof leak: $7,500 estimated repair
๐ฟ Aging but currently functioning water heater
๐๏ธ Worn bedroom flooring: $4,500 estimated replacement
Thatโs approximately $12,000 worth of work.
The buyer asks the seller for help, and the seller agrees to an additional $12,000 credit.
Sounds great, right?
Not necessarily.
A seller credit isnโt a $12,000 repair check.
Seller concessions are generally used toward allowable buyer closing costs and prepaid expenses. They donโt simply turn into cash that the buyer can take home and use however they want.
Under current Fannie Mae guidelines, for a principal residence or second home with an LTV above 90%, financing concessions are generally limited to 3% of the lower of the purchase price or appraised value.
There is another important limitation: financing concessions generally cannot exceed the buyerโs actual eligible closing costs.
So letโs look at the numbers.
The buyer has $34,000 available for the purchase, including earnest money already deposited.
Before the inspection:
Down payment: $25,000
Closing costs and prepaids: $12,000
Existing seller credit: -$6,000
Total buyer funds needed: $31,000
Cash remaining after closing: approximately $3,000
Now add the proposed repair credit.
Three percent of a $500,000 purchase price would be $15,000, assuming the appraisal isnโt lower.
But the buyer only has $12,000 in actual closing costs and prepaids.
Since the seller is already contributing $6,000, only another $6,000 could be applied toward those $12,000 of costs in this example.
Instead of leaving closing with approximately $3,000, the buyer could potentially leave with approximately $9,000 of their own money still available.
Thatโs certainly better.
But rememberโthe repairs total approximately $12,000.
The buyer is still about $3,000 short, and thatโs before keeping any emergency savings or repair cushion.
What happens to the extra credit?
It doesnโt automatically become cash in the buyerโs pocket.
Under Fannie Mae guidelines, financing concessions above the permitted limits are treated as sales concessions and can affect the sales price used when calculating the loan-to-value ratio.
That could potentially change the financing.
This is exactly why the lender needs to review repair-credit amendments before everyone assumes the numbers will work.
Thereโs another problem: timing.
The flooring probably isnโt stopping this transaction.
Worn flooring is generally considered minor or deferred maintenance when it doesnโt affect the propertyโs safety, soundness or structural integrity.
The water heater may also be acceptable if itโs functioning properly and doesnโt present a safety issue.
The active roof leak is different.
Fannie Mae specifically identifies active roof leaks as an example of a condition that can affect a propertyโs safety, soundness or structural integrity.
If the appraisal identifies the condition as requiring repair, the appraisal may be made โsubject toโ completion of the repair, and the lender must obtain appropriate evidence that the work has been completed before the loan can ultimately meet Fannie Maeโs requirements.
And hereโs where the repair-credit strategy can fall apart:
A credit received at closing doesnโt solve a repair that has to be completed before closing.
The buyer doesnโt own the house yet.
So what should buyers and sellers be discussing?
Depending on the property, loan program, appraisal and lender requirements, there may be several ways to restructure the agreement.
The seller might complete a lender-required repair before closing.
The parties might use the allowable seller contribution toward the buyerโs closing costs so the buyer can preserve more of their own cash for repairs after closing.
They might renegotiate which repairs the seller handles and which repairs the buyer takes responsibility for later.
A price adjustment could also be considered, although buyers need to understand that a lower purchase price doesnโt necessarily give them cash after closing to pay a contractor.
For properties needing substantial work, buyers can also ask their lender whether an appropriate renovation loan or other financing option is available.
The bigger lesson
When negotiating repairs, donโt stop at:
โHow much is the seller willing to give us?โ
The better questions are:
How much of that credit can the buyer actually use?
How much cash will the buyer have left after closing?
Which repairs must be completed before closing?
Which repairs can safely wait?
And most importantly:
Does the agreement actually work with the buyerโs loan?
A $12,000 seller concession can sound like a great solution on paper.
But if only part of it can be used and a major repair has to happen before closing, that agreement may not solve the buyerโs problem at all.
Thatโs why the buyerโs agent, lender, appraiser andโwhen appropriateโqualified contractors need to communicate before the repair amendment is finalized.
The goal isnโt simply to negotiate the biggest credit. Itโs to structure a deal that can actually close and leave the buyer financially prepared for what comes next.
Loan programs, lender overlays, appraisal requirements and allowable seller contributions vary. Buyers should confirm the specific terms and limits of their financing with their lender before agreeing to a repair credit or concession.
Lisa Ford, REALTORยฎ
Keller Williams Realty Smart
๐ 863-510-3890
โ๏ธ [email protected]
