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Many times in speaking to Realtors who have clients asking to see properties that are old, outdated or missing key components, they ask why show these properties ? Why not look at a remodeled home or newer one instead ? They say look for another that is updated or “move in ready”.

As a loan officer who has done many rehab or renovation mortgages for buyers, both FHA 203K and conventional Homestyle I do have experience and am happy to present it and offer my help to Realtors and buyers.

Here are my thoughts and experiences both for Realtors and their buyer clients:

  • The price of an outdated but functional estate sale home sold by the heirs often is an opportunity to buy a home in a great location at a discount. Heirs usually don’t bother to update a home left to them by parents or other relatives to sell it. If any new homes are available they will likely be sold at a premium over a home not remodeled in 40, 50 or more years. With a renovation loan it is always one loan including the purchase price plus the dollars to rehab minus the down payment. One mortgage, one payment will get you a remodeled estate sale home.
  • In many communities there are vacant, foreclosed properties for sale. These can often be purchased at a discount over the other homes for sale in the community. I speak to many clients who are overwhelmed when they see them. They tell me there is mold, missing furnaces, broken water pipes, holes in walls, scratched wood floors, stained carpet, broken kitchen cabinets and so forth. All very scary for any buyer but even worse for a first time buyer. Here all that’s required is some vision of what the home can be. My job is explain the finance part of it by estimating the monthly payment at a given sale price plus the rehab dollars to get to a great finished product.
  • A buyer may just want to be in a specific school district or favorite neighborhood where no new homes are available. Or there may be a perfect property on an excellent lot but it is just not to the buyers taste. Such a home might have already been rehabbed recently but just not in an appealing way to the buyer. A 203K or HomeStyle loan can be used to remodel a home that for some needs no remodeling but for one buyer it must be changed. Maybe all that’s needed is a new granite kitchen counter and stainless appliances or new faucets in the bathroom with a new toilet.

In these examples the end result can even be a property that is worth more than what was paid for it plus the funds used to renovate. That is called realizing “hidden equity” or creating new equity. That’s a bonus in addition to a buyer having the perfect home in the most favored location. This is also helpful to Realtors showing many homes to buyers who just can’t find the perfect one. Offering a client knowledge of rehab loans is a way for any Realtor to be seen as an expert by their buyer clients. More happy clients usually leads to more business.

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!

Join the discussion 4 Comments

  • April Cook says:

    I never thought of using a rehab loan to buy a house. i like your suggestion that doing this can help you get a property in the school district or neighborhood that you want. Does the loan usually just cover the purchase of the house, or will it cover renovations too? Thanks for this great information.

    • PerryF says:


      The rehab loan covers both the purchase of the house and the cost of the rehab all in one loan, one monthly payment. For example if you saw a home selling for $100,000 that you wanted to update with $40,000 of rehab funds the total acquisition cost is $140,000. Minimum down payment on a 203K is 3.50% of the 140k or $4900. The mortgage is the rest or $135,100.

  • Sammy Burke says:

    I guess that it’s good to know that foreclosed home properties that are on sale can be can be purchased at a discount price. How will a rehab loan help in obtaining possession of the property? I’m wondering how because my father showed me several foreclosed homes that rehab loan might cover.

    • PerryF says:

      A rehab loan helps in obtaining possession of a property in that no one cares about the condition of the property. All deficiencies will be cured by the rehab funds designated in the scope of work from the Contractor. A foreclosed home is a p[rime candidate for a rehab loan as it may be so trashed and dangerous to occupy that regular mortgage loans will be prohibited.