The lenders I deal with stopped accepting repair escrows after the 2008 meltdown. I advise against them anyhow, because it seems that the buyers will still offer the same amount of money for the home, no matter if the allowance is there or not. Just put that $5000 toward the lowering of the asking price and get it sold. If memory serves me, you were going to lower the price to $210,000 with the $5000 allowance. Just ask $205000.

How that is handled in my area is the $5000 goes toward buyers closing costs and then the money that they had set aside for closing costs can be used for improvements after closing. Or, the alternative is exactly how ncrealestateguy described. The lender will allow the seller to contribute toward buyers closing costs but not their down payment.

DD just bought her first house and the seller offered a 'buyer's assist' - it doesn't go toward the down payent but it does go toward closing costs. In her case I think it was close to $3000.