One of the first things I would do is check with MY lender. FHA loans and many conventional loans today require that code violations and health and safety issues be corrected BEFORE you can fund your loan to purchase the property. The question of credits or lower purchase price may be moot if you cannot finance the purchase.
Once that is resolved, it truly depends on your cash position and your way of thinking. A credit will provide you with the cash to make the needed repairs today. If you take a reduced purchase price, figure how long it will take to recoup your out of pocket expenses and if this is attractive to you. (Example: $10,000 credit vs. $10,000 reduction in price. A $10K price reduction will save you about $65 per month P&I at current interest rates and about $10 per month in property taxes. It would take you over 11 years to break even. Does this make sense to you? Or would it be better to take your $10K credit / cash at the close of escrow. I know I would take the credit in this scenario, but each person is different.)
Best of luck to you in your new home purchase, do not hesitate to contact me if you have more questions. I have helped people work through last minute problems in getting their deals done just as a favor, no strings attached. I strongly believe that everyone who wants to own a home should and I work hard to make that a reality. Dare to Dream.
Real Estate Consultant
RE/MAX Palos Verdes Realty