How Renovation Loans Help Agents Sell Homes
“We need inventory”
- Every Agent, in every market, in early 2016
While real estate is local, mortgages often are not. Being licensed in several states around the country, with each state having different markets within them, I get to see a lot of variances in markets along with many similarities. One thing that seems to be consistent from sea to shining sea is a shortage of inventory, and markets that lean at least somewhat toward a seller’s market. In some areas it’s so extreme that agents don’t even want to work with buyers in price ranges where competition is high.
While it’s apparent that a lack of inventory is a problem, the larger problem lies in the fact that quality, move-in-ready inventory is tough to come by. In nearly every market I work in, there is inventory available that needs “a little TLC”. There are handyman specials to be had, and homes with puke-green shag carpeting, fancy plastic-wood paneling, windows that allow as much airflow as a good screen door, and roofs with a life expectancy of last week readily available on the market. The problem is buyers are picky – most want to move in and get to living, not get to working. And sellers just got back all of the equity they lost in the crash – they don’t want to give their home away just because it needs some work.
This scenario is where the renovation loan comes in, and opens the door for agents to work with lenders familiar with these programs to sell more homes.
The 3 major renovation loan programs available in the market today are the FHA 203k, the FHA 203k streamline, and the Fannie Mae Homestyle Renovation loan program. These programs are available to allow buyers to finance a large portion of repair and renovation costs – the solution to a home with great potential that’s not quite there yet. For the Homestyle & 203k loans, renovation possibilities are seemingly endless. Everything from flooring to energy efficient upgrades are possible. While the 203k streamline is somewhat limited by a $35,000 renovation cost cap, in most markets, this is sufficient to make some very substantial improvements to a home in need.
So why are these homes that need a little love still sitting on the market for so long? For the most part, it’s a simple lack of buyer and agent education. Renovation loans have the reputations of ghosts. Everyone has an experience, or has “tried to do one”, but no one seems to be confident in informing buyers and seller of the possibilities these programs open up. Loan officers that know what they’re doing with renovation loans are unicorns. Mythical creatures that many believe are out there, but no one’s really had an encounter with a closer of this mystical product.
For listing agents, renovation loans can help sell a home. Plain & simple. “How”, you ask? As a listing agent, have you considered working with a contractor familiar with renovation loan products? One that has design tools that could take simple measurements and photos of a home and create a digital blueprint/tour of what a “handyman special” could look like with the financed repairs of a renovation loan? If you’re looking at a DOM of 150 days in a hot market, it’s likely because you either aren’t priced in this universe, or buyers are seeing the home for what it is. What if you could show them, when they come to visit, what it could look like, and then educate them on the renovation loan and it’s possibilities.
For buyers agents, renovation loans can help you become a superhero for those buyers with a handyman special budget and a move-in-ready appetite. What if you could tell these renters with a dream “You can buy the home, finance the renovations & repairs to make the home exactly what you want, and even finance the first 6 months mortgage payments so you don’t have to pay rent AND a mortgage”? Think they’d be at least interested in what you have to say?
Renovation products can be game changers for a real estate agent that works with a knowledgeable loan officer. Wouldn’t it be nice to sell that home that 2 agents before you couldn’t? Wouldn’t it be great to help a buyer get into their dream home in a market where dream homes sell for cash above list price with no contingencies while competing with 20 other offers? Renovation products open the door to this type of scenario. These loans open the door to help listing agents sell more homes faster, help buyers agents help buyers against seemingly impossible odds, and help loan officers that offer niche products (like me! I know…shamless plug….) earn your trust by helping you improve your business.
In my humble opinion, renovation loans are the most (and it’s not even close) under-utilized mortgage product readily available across all markets. Let’s change that, shall we?
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