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There is plenty of room for a nice transition area there. Rather than stuffing the patio up against the stairs and making one or the other look like an after thought, you could have a second level of the patio that is just as big or small as you want it for a landing area at the foot of the steps. This adds more interest to your hardscape.
Another approach, the one that I would take, is to leave a nice sized planting bed along the foundation and cut the patio in. Then the retaining would be between the house and patio so that the patio is at the right elevation for the stairs. You could either ramp up to the walkout, or have steps there. It also takes away dead patio space (the areas too close to the house to be usable) and allows you do make a much more appealing patio by dressing it out with plants rather than a foundation wall.
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