Home Renovation Is A Beautiful Thing!

Mortgage and Lending with Southern Trust Mortgage NMLS# 139186


So….yesterday I posted my very first blog ever…I can check that off my bucket list. I was surprised by the warm welcome I received from the community…definitely makes me feel good….Thank you every one.

Today I want to talk a little bit about what I do in the Baltimore market in regard to properties that need work. I do quite a bit of renovation financing for both buyers and refinance clients. Over the years it has become a bit of a niche product for me; I even have a web site devoted to nothing but renovation financing:


It is interesting that this site brings in lots of inquiries from outside my market area as well as potential clients within my area. Here at Southern Trust we lend in DE, PA, DC, VA, NC, SC, TN, GA, FL and of course MD, where my office is located. It is a shame that many calls that I get are from people that have tried to go down this road and failed, for one reason or another. The most common reason I see for failure is bad advice, whether it is from the lender they are working with, their realtor, or a friend or family member.  These programs are specialized and have very strict guidelines when it comes to what work can be done and how the contractor gets paid.  The lender must be well versed enough to be able to say “NO, that is not right!” You can’t use this money for an in-ground pool or a detached garage if they are doing a 203k loan.  Anyway, that is not really what I wanted to talk about.

I used to see a lot of renovation loans for properties that needed updating and/or the replacement of items taken from the house when it was foreclosed. I still see that fairly frequently but am seeing more and higher value homes with mold issues.  There is no loan product available that will let you finance a home that has mold other than a renovation loan.  There is the FHA 203k and the Fannie Mae Homestyle; both of these loans allow for the home to be renovated AND to use the completed value rather than the as is value, when valuing the property.

Mold can be a very dangerous thing, especially in the home where we spend so much time. With so many homes out there that have been vacant for long periods of time without the heat or air conditioning running, mold can grow and once it is in the home and the systems are turned on, the entire system needs to be cleaned and the entire home needs to be tested and possibly treated.

This past August I was introduced to a client by one of the realtors I work with. Together, they had found a home that was listed as a short sale and it had been vacant for over 2 years. The systems were off and had not been run in almost as long. There was mold in the basement and for that reason it sat on the market. The price was reduced every few month. I think the original list price was $650,000. After several months and some brilliant negotiating by their realtor, the bank was willing to accept an offer of $550,000. The mold remediation was only $7800. That may seem like a lot but remember, that not only includes the removal of the few sheets of effected drywall, it also included cleaning the entire heating and cooling system.  Every time the house was shown the systems needed to be turned on, possibly spreading the mold throughout the house.

Now, the issue with both renovation loans (FHA 203K and Fannie Mae Homestyle), for a property with a sale price this high, is that the loan limit with minimum down payments of 3.5% and 5% respectively. Once we add in the cost of the remediation and the contingency reserve and the other fees that go into the cost of the repairs, the clients needed to bring $43,000 plus closing costs to buy this house. But remember that the house was originally listed for $650,000 and the market has only gotten better.

The house appraised for $720,000! So the day they bought it and after the remediation, they had over $150,000 in equity. I wish I could take credit for this great deal, I wish there were many more out there just like it, maybe one for me.

Posted by



Scott Eisgrau
Southern Trust Mortgage
Vice President
NMLS# 139186
443.738.9138 Direct | 410.977-1201 Cell | 888.562.6510 Toll Free

Southern Trust Mortgage, LLC, is proud to be an Equal Housing Lender – NMLS 2921




Comments (8)

Sondra Meyer:
EXP Realty, LLC - Corpus Christi, TX
See It. Experience It. Live It.

Scott, one again, congratulations on writing your first post yesterday.

This post contains some really good information about the renovation loans. Unfortunately, it is showing as a members only post so that the general public can't benefit from it. Hopefully, you can change that because I think this is such good information it would be nice for people other than Active Rain members to be able to see it.

Take care,

Mar 03, 2016 12:32 PM
Scott Eisgrau



Thank you. for the public to see it I would have to go to the fee based subcription, correct? I am not sure that I am ready to make the commitment to blog reguraly enough to make the investment...I say that and then I am not even sure how much it is...

Mar 04, 2016 03:26 AM
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Scott Eisgrau wow! $150K of equity built in no time - a good deal for buyers for sure.

Mar 03, 2016 01:55 PM
Scott Eisgrau

Yeah, right...it's kind of crazy...I wish more of my clients had the same motivation these clients had...

Mar 04, 2016 03:26 AM
Kat Palmiotti
406-270-3667, kat@thehousekat.com, Broker/REALTOR® - Kalispell, MT
Helping your Montana dreams take root

Wow, great move for those buyers. Many buyers don't want to be bothered with a moldy house (and there are quite a few) and they just move on.

Mar 03, 2016 07:20 PM
Scott Eisgrau

I don't know if I blame them...mold is scary...I think thats why we require the entire home to be tested when it is found. The shame of it is that many homes that sit probably have mold that goes undetected.

Mar 04, 2016 03:29 AM
Lisa Glowacki
Lisa Glowacki - Rhode Island & Massachusetts - Tiverton, RI
Real Estate Broker - RI & MA

Love renovation loans & fixer-uppers.  You are so right with your advise not only do you have to have knowledge of loans you have to be prepared to fill out additional paperwork i.e. contractor credentials to keep the transaction moving in a timely manor.  Equity position for buyers a major plus! And a like new home.

Mar 03, 2016 10:17 PM
Scott Eisgrau

Lisa, you are right on the money. They are great loans and many times the buyer can end up with a brand new home.

Mar 04, 2016 03:30 AM
Nicole Doty - Gilbert Real Estate Expert
Zion Realty - Gilbert, AZ
Broker/Owner of Zion Realty ZionRealtyAZ.com

Doing renovations certainly isn't everyone's cup of tea but to those savvy homeowners who put in the investment it can pay off big time. 

Mar 03, 2016 11:06 PM
Scott Eisgrau

It really does take someone that can vision the finished product...I teach a class at the local Real Estate board for CE credit and I try to make it clear that when a buyer says something like" i love the house, but...." and that but is something that can be rehabbed not to give up on that particular property so quickly, especially with so little inventory.

Mar 04, 2016 03:34 AM
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

Congratulations on the featured post. I will share it with others.

Mar 04, 2016 03:20 AM
Scott Eisgrau

Gita, Thank you...I have no idea how that even happend

Mar 04, 2016 03:34 AM
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Real Estate Agents - Luxury - Divorce

The more you blog, the easier it gets...welcome to the Rain!

Mar 04, 2016 09:05 PM
Scott Eisgrau

THank you, Sally. I will keep at it.

Mar 05, 2016 12:53 AM
Jane Chaulklin-Schott
TEAMCONNECT REALTY - (407) 394-9766 - Orlando, FL
TeamConnect Luxury Homes - Orlando, Florida, 32836

Totally agree that this is an excellent, informative post, Scott Eisgrau.  It is something the PUBLIC would appreciate.  

Mar 13, 2016 08:27 AM