Seller Credit vs. Repair: When Does the Risk Outweigh the Reward?

Imagine buying your dream home, only to discover a hidden financial nightmare lurking beneath the surface. Sound scary? It can be! Home inspections are a critical part of buying a home (video), but you may not be able to see the entire problem without tearing into walls, yard or otherwise damaging the property.

When negotiating real estate deals - especially around repairs - the choice between a seller’s credit (cash at closing for the repair) and pre-settlement repairs can be a high-stakes gamble. Let’s dive into when taking that risk might cost you more than you bargained for.

As a real estate professional, I often advise buyers and sellers to accept credits at closing. It simplifies the process and helps ensure everything stays on track for a smooth, on-time settlement. Sellers avoid the hassle of hiring contractors and the risk of buyers being unsatisfied with the completed work. Buyers, in turn, get to choose their own trusted professionals to do the job right - or use the funds however they choose after closing.

But there are exceptions - especially when repair costs are uncertain or the issue hides a bigger problem.

So, when should you push for repairs, and when is a credit sufficient? Here's a quick guide:

Repair vs. Credit: A Quick Guide

Repairs You Want FIXED (Pre-Settlement)	Repairs You Can Take a CREDIT For
Buried Oil Tank Removal	Visible Plumbing Leak (under sink)
Septic Tank Issues	Non-Working Electrical Outlets
Unsourced Leak with Potential Mold	Minor Roof Repairs (flashing, nail pops)
Termite Damage Behind the Walls	Hot Water Heater Replacement
Any Repair with a High Risk of Escalating Costs	Straightforward Jobs with Low Risk of Hidden Damage

Removing a buried oil tank

Why the "FIXED" Column Matters

There’s one scenario where I strongly urge buyers to demand pre-settlement repairs: hidden risks. Take, for example, a buried oil tank. Let’s say the seller offers a $1,000 credit to cover removal, matching a quote you’ve received from a contractor. Sounds fair, right?

But is it that simple?

Not exactly. These tanks, while not always subject to current legal regulations, carry serious long-term liability. When removed, soil samples are typically required by environmental agencies. If contamination is found, cleanup costs can skyrocket - sometimes hitting $5,000 to $20,000 or more. Suddenly, that $1,000 credit doesn’t seem so enticing.

Mitigating Risk Without Derailing the Deal

It all comes down to risk tolerance. As your agent, it’s my job to walk you through the potential pitfalls - even when your instinct is to get to settlement as fast as possible. And yes, that’s always your choice in these situations.

To help keep deals on track, we can consider creative solutions like escrowing funds. The seller agrees to set aside a portion of proceeds - held by an attorney or title company - to cover potential remediation. But even this isn't foolproof. What happens if cleanup costs exceed the escrowed amount?

These negotiations can be tricky. Sellers are hesitant to escrow large sums, and buyers are understandably nervous about footing surprise bills down the line.

Conclusion

Navigating these scenarios requires a clear understanding of the risks, local regulations, and strategic negotiation. Whether you're buying or selling, having a trusted real estate advisor makes all the difference.

Don’t leave your biggest investment to chance - work with someone who knows how to spot the red flags before they become costly mistakes.