Understanding the FHA 203(k)......Part Three
Marketing the opportunity
In my previous segments I discussed exactly what the FHA 203(k) loan is and the specifics of the underwriting and process of working with a client utilizing the product. This segment is focused on the "how to" generate and market business using the FHA 203(k) program. There are many opportunities and I believe they all start with having a "vision" for the perfect version of any particular home.
Every listing agent has either listed or previewed at least one "ugly baby" house. And, in Real Estate marketing school we all learn the words to describe our "ugly baby": "charming", "cottage", "unique", "cosmetic touches needed", "fixer" and on and on......and, the words are used so consistently that the mere sight of the word "charming" strikes terror is the heart of buyers agents and buyers alike. Somehow, most "charming" homes are anything but charming.
Instead of marketing the home as a fixer, hope about marketing the homes potential....essentially the FHA 203(k) program allows a buyer to customize their new home purchase. Anything as minor as updating appliances to a complete renovation of the home can be accomplished through the program.
Consider having a contractor or architect do a preliminary sketch of a couple versions for the renovation. Most will do this service for little or no fee for the opportunity to provide the construction or design services. Many people simply do not the vision to see the completed project after a wall is removed or the kitchen is renovated. Helping the buying public (and their agents) see the homes potential is crucial......showing them the financing path is invaluable.
Alternatively, you may know potential future listings that would benefit greatly by doing a 203(k) refinance prior to listing to reap the increased value in the sales price. Instead of selling or listing the "ugly baby", it may make sense do the renovation prior to listing.
In any case, educating the sellers of an additional avenue for financing can be very valuable, particularly because very few agents are knowledgeable about the product. Everyone wants to "customize" their home, most think it is an opportunity only for the wealthy...selling the opportunity to customize is spot on marketing for your sellers.
I have to suspect that every buyer's agent would love to earn a dollar for every "except" they have heard when viewing properties with their perspective buyers. The conversation goes something like "I really like this house......except the kitchen", "except the master bedroom", "except the appliances", "except, except, except........" and the list goes on.
Create the opportunity that exists in "imagine" house hunting. Quite searching for the perfect house and focus on showing the most discriminating buyer how they can have exactly what they want and how they want it. Collaborate with a home inspector or contractor to do a "what if" walk through on the property.
Consider doing seminars on the advantages of the FHA 203(k) program....nothing tells a consumer more about you than sharing knowledge and opportunity. Consumers really know nothing of this program and, in a market of distressed sales and foreclosures, the FHA 203(k) offers opportunity where there appears there is none.
Refinance your way into positive equity
This is probably the most unique way for consumers to regain lost equity and potentially avoid the necessity of a short sale. Underwater on an under improved home? Consider a FHA 203(k) loan to bring your home up to the expectant standards, increase your value and sell at a profit..........instead of selling at a loss and damaging your credit for a considerable period of time.
Essentially, working with the FHA 203(k) loan requires VISION........and an absolute understanding that the vast majority of buyers, sellers, listing and buying agents do not possess the skills to see the "after" view of a property. The proliferation of the staging industry should be enough to convince even the most optimistic that the average person only sees what they see and cannot wrap their thoughts around the potential. Anyone wanting to be successful working the FHA 203(k) program must be able to focus on the "what if" potential of the subject property.