“Minus the safety, security, and cleanliness factors, this house is our dream home!”
Let's face it, this is not your grandma's real estate market. Buying a home in today's market is different than buying a home a few years back. The standards of house conditions have fallen drastically in a relatively short period of time. New homebuyers are no longer expecting to find their dream home that's in move-in condition when escrow closes. The current real estate inventory is cluttered with junky houses and fixer uppers.
Banks are not willing to put in a lot of money into a property they are already losing money on in a foreclosure. Short sale properties, well, they are short sales for a reason, so don’t expect any major improvements or concessions from the sellers. With regular listings, a homebuyer is not likely to get a lot of help from the sellers who are competing with bank owned and short sales on the market.
As a contractor working in real estate construction services, we see all the hidden gems in properties… faulty plumbing, rusted out water heaters, moldy bathrooms, hazardous electrical issues, unidentified odors, “discolored” paint, holes in the walls, ceilings caving in, decks collapsing... just to name a few. Some of these issues are visible eyesores and can be easily fixed with some elbow grease, but MANY repair issues are not so obvious to the eye and involve the SAFETY OF SYSTEMS, and these are the issues homeowners need to be MOST concerned about.
Plumbing systems, electrical systems, HVAC (Heating, Ventilation, Air Conditioning), and secure supporting structures such as decks and balcony’s should be the areas of greatest concern to homebuyers. A homebuyer might be able to get away with putting off painting a room, but they cannot put off a leaky water system or hazardous electrical lines.
Keep in mind, most of the homes in today's real estate market offer zero concessions in repairs. There are typically no available funds to even make NEEDED repairs involving the safety and security of the home. Also, a homebuyer needs to understand that a house sold in AS IS condition does not mean the house is SAFE to move into. Most cities will not make you pass a thorough safety inspection prior to buying a house and most listing agents will not perform an inspection on the property.
In fact, it is our experience that some agents provide as little disclosure as possible in regards to the true condition of the property. Recently, we red flagged a current listing on the market with MAJOR electrical and structural defects. The stairs to the balcony nearly collapsed on us and hot wires were exposed in the house with hidden water leaks throughout. The listing was taken off the market because it was a major safety hazard for those viewing the home. The Realtor was not real happy to learn the listing was not able to be shown until the issues were fixed. Unfortunately, this is a far too common problem with the listings we find on the market today.
Even with homes brought to "marketable condition" it takes a constructive vision to sell the distressed property to a homebuyer looking for an immediate move in. Once the Realtor or homeowner can visualize personalizing the house, making it safe and secure, and turning it into their dream home, another problem exists..."Who is going to pay for the repairs and upgrades?"
REPAIR AND REHAB PAYMENT OPTIONS
1.Buyer's Cash
The buyer can pay for repairs and rehabs themselves. Simple if the buyer has the cash on hand.
2. Seller's Cash
Seller can concede funds for repair and rehab work. If the bank is the seller, the buyer is likely to get the bare minimum for issues, such as code violations, if any assistance is given at all. A short sale will likely allocate zero funds for the Buyer. In a regular sale, the seller might choose to make the repairs themselves or just choose to refuse all repair requests, and/or renegotiate the price of the house.
3. FHA 203K
FHA (Federal Housing Association) offers financing on FHA homes. In order for the home to receive financing, two conditions must be met. One, the buyer must be approved for the loan through FHA. Two, the home must be approved for an FHA loan. FHA 203k can be used to fix the home to make it FHA complaint. There are a number of restrictions and requirements, but overall, the FHA 203k is an option for most rehab and repair work once conditions are met. A licensed contractor is required in most cases to provide the bid and do the work.
4. Title-1 Loan options
Most homebuyers can get a quick and easy $25,000 to fix up any property- bank owned, short sale, or regular sale. It’s simple to do and opens up every listing to buyers who are not quite happy with what they see on the market or who are short on funds to improve their new purchase. If a buyer qualifies for a conventional or FHA loan, chances are they also qualify for the Title-1. The paperwork is very easy, and there are no delays in escrow, unlike the FHA 203-k which can take as long as 90 days.
Rates are from 6.99% but generally fall into the 8-9% range. Terms are up to 240 months, and as short as 60 months. Minimum loan amounts are $5,000 to a maximum of $25,000. Funding is dual check- owner/contractor and funds as quickly as 10 days after escrow closes. There is also an additional $20,000 unsecured loan that 75% of the buyers will qualify for that can be tacked on to the top for work above the $25,000. That’s $45,000 for upgrades, rehabs, or additions.
If you need more information on repairs and financing options, contact 877.775.8169.
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