Comparing a 5% sales price reduction to a 3% closing cost credit. Which is better?

I don't understand why a seller would offer this choice. Why not a 2% reduction in selling price and a 3% credit for closing. That's what I would ask for. It really makes no difference to the sellers bottom line vs the 5% sales price reduction and this way you can have the best of both worlds.

Please give me more information so I can tell you what makes more sense. What is the purchase price of the home?

You should ask for exactly what I said as it does not make any difference to the seller whether they give you a 5% reduction in selling price or a 2% reduction and contribute 3%. This is what you should ask for if you want to have your closing costs paid for. If you don't care about the closing costs, then ask for the 5% reduction. Offering 3% to cover closing may help you, but it is less of an offer.