I speak with home owners with properties for sale and Realtors with listings for sale frequently. Many times these properties are not selling quickly. One reason might be the price is too high for the local market conditions. Often a reason a property is not selling is because it is not appealing to buyers. This may be due to a kitchen or bath appearing old or outdated for example, or other perceived defects. I know from working with buyers they may be placing all their available funds into a down payment and closing costs. This means that there is no cash left over to remodel the kitchen and baths or install new flooring, new lighting, paint, etc. These circumstances can keep potential buyers from offering on a property.
A solution to this problem is to educate and inform buyers that funds to remodel an older home can be added into the same purchase mortgage. Meaning, there will be one mortgage and one mortgage payment for both the home purchase price, minus the down payment, and for the funds to remodel. Not only that but the mortgage approval will be based on the future “after improved” value of the property rather than just the current sale price. The FHA 203K and Fannie Mae Homestyle renovation mortgages both use the future value of the property for the loan approval process. This is what allows a buyer to have funds to remodel added into the one mortgage – the final completed, updated value with the improvements made.
The reverse is also true for a seller who wishes to sell a property close to their desired price. A seller can use one of these renovation loans to refinance out of any existing mortgage(s) to access funds to do popular updates prior to listing the home for sale. The new loan will be based on the future “after completed” value of the property. It may be that with a new kitchen, baths or other updates, a home may sell for more than the cost of these updates. Or the home may sell more quickly. This is a strategy for sellers and their Realtors to consider.
The challenge is to get the word out to buyers that a property can be purchased this way, with funds to remodel included from the start. What I have done below is provide tools for sellers and Realtors to use to inform buyers. I call it a Realtor Renovation Sales Tool Kit. I help Realtors sell homes more quickly.
Realtor Renovation Sales Tool Kit
- Add words to the online listing so buyers will learn as they browse the listing. For example: * * Property qualifies for special renovation financing. Qualified buyers can roll the repair & remodel cost into their mortgage * *.
- Place signage in a window or outside the home informing everyone the home can be financed with a renovation loan. These signs can generate calls by themselves when partnering with an experienced renovation loan officer. I have seen these signs generate more calls when placed outside the property than a “for sale” sign. I have such a sign available.
- Have sheets placed around the home which show an example of what the kitchen, bath, basement or other area can be when remodeled – a sort of “before” and “after” vision for the property. These sheets can also show the estimated required down payment and total estimated monthly payments at a given sale price with a given budget for the remodel. Buyers often consider the monthly total payment when making a purchase decision.
- Do a Renovation Open House with actual renderings to hand out of what the home can look like based on using home design software to show what can be done to specific rooms or exteriors. Have a contractor present to speak to buyers who may not be confident about a doing a renovation project. The contractor can answer their questions and provide valuable insights. Have an experienced renovation loan officer present to address renovation lending questions.
- Make a short video in the property explaining that the home can be updated with a renovation loan. Below is a link to a video we did here at AmeriFirst Home Mortgage for a tough listing that had an unfinished attic space buyers had expressed concerns about – meaning the home was not selling quickly since buyers were planning to use all their funds for down payment and closing costs with nothing left to finish the attic. A video like this one can be referenced in the property listing or placed on the Realtors Facebook page, LinkedIn, etc.
As an experienced renovation loan officer I’m happy to help you sell a listing with a renovation finance option. Using the Tool Kit allows Realtors to take more listings in poor condition with the confidence there is a way to effectively market them. As a Realtor you may see listings that are cancelled or expired. Consider using the Tool Kit and an experienced renovation loan officer to go after such listings to grow your business. Armed with the Tool Kit you have an advantage over other Realtors not aware of this process when making a listing presentation. If you are a new Realtor looking for ways to get more listings the Tool Kit may be exactly what you need. Or if working with buyers use this information to inform them they have options to buy and remodel which most may not be aware of. Get more buyers out of your car and into contract more quickly.
I hope this post has been helpful and encouraging to those that may have thought a Renovation project was too complex or beyond their ability to manage. My intent is always to inform, educate, and generate discussion. Please call me or email me directly or visit my website for more information on renovation loans. I welcome your comments and questions!