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In this post I would like to present for Real Estate Brokers how renovation mortgages can be used to assist in selling REO properties or those may not be appealing, with an outdated floor plan or just too damaged to be safely occupied. The properties can be foreclosed and now back on the market or HUD homes. These can be estate sale properties where nothing is being done to make them presentable for a new buyer or FSBO’s that often need updating.  

Real Estate Brokers who specialize in REO or HUD home listings can benefit by becoming familiar with renovation mortgages buyers and their Realtors may not be aware of to sell properties more quickly. There are renovation mortgages for owners who will occupy or for Investors who will never occupy. 

Recently a client of mine purchased a HUD owned, previously foreclosed home, that had been damaged and was not livable and not able to be purchased using a regular mortgage due to dangerous conditions. The HVAC was not working, no water or gas was turned on due to damaged pipes. I spoke with the listing Realtor to explain how a renovation mortgage can solve all those problems and allow the house to be sold just as it was, without even turning the water back on before closing.  All repairs are done after closing and seller has no responsibility for condition of the property when purchased with a renovation mortgage. The property can be filled with debris, old furniture, no electricity, or HVAC on, etc. and will still close with a renovation mortgage. This buyer used a Conventional Choice Renovation mortgage to purchase the house and pay for repairs and updates by adding some $40,000 into the mortgage. The listing agent now has a new tool to assist in marketing these damaged homes. 

Many times, I have seen properties for sale that have been damaged, have health and safety issues or even with interiors demolished by an owner who could not complete a renovation and now must sell quickly.  Several of my clients have purchased properties with building code violations noted that were resolved with the renovation plans. I once had a client purchase a property in such dangerous condition the city had placed a demolition order on it. But the renovation mortgage and contractor proposal solved that problem after closing.   

Renovation mortgages can be helpful if a listing Real Estate Broker has an undesirable home but in a popular school district.  Noting a renovation mortgage can make the home new again may be helpful as a marketing tool for those seeking a home in a particular location or school district.  

In these times of generally low inventory in many markets, renovation mortgages can be an answer to the lack of pristine properties available in preferred locations. Restoring and bringing older properties up to date and back into service can be helpful for a community as well.  

I want to present renovation mortgages as a sales and marketing strategy for Real Estate Brokers who work with HUD or other agencies or institutions to sell foreclosed and damaged properties or who may have a challenging listing. Frequently I see listings for these properties where the seller is accepting cash only offers. This is one way to sell these damaged properties, but in seeking only cash buyers, that may limit the pool of buyers unnecessarily or may be prolonging the market time. It’s also possible a cash offer may be lower than a financed offer on a given damaged property. Instead, the listing Realtor can include that a renovation mortgage is available to buyers to cure all issues, as part of the property marketing plan.  

Below are 10 tips and techniques on offering renovation mortgages for properties that otherwise cannot be financed with a regular mortgage- 

  • Post a short video on renovation mortgages being available for a distressed property  
  • Add public comments to the listing noting a renovation mortgage is available  
  • Place a flyer in the property showing renovation mortgage funds are available to update it with an example payment for a given amount of renovation dollars 
  • Install a large yard sign to show renovation financing is available to restore it 
  • A HUD Consultant can create a Feasibility Study to specifically define mandatory repairs to meet building codes and restore the property to show approximately what that cost may be to buyers 
  • The Feasibility Study can be helpful in setting the sale price with cost of repairs discovered up front for buyers to understand 
  • A General Contractor can walk through the property and prepare a proposal of what the costs may be to fully restore the home as a guide to hand off to prospective buyers 
  • Have a licensed Home Inspector prepare a property condition report for buyers to use as a guide in planning what must be replaced at a minimum  
  • A market analysis using nearby closed properties of similar size that have already been renovated can be helpful in showing buyers the potential gain in equity a renovation mortgage can offer them when completed on the subject property 
  • Look for canceled and expired listings not selling due to property conditions & FSBO’s 
  • For listing appointments, explain to sellers you have a tool called a renovation mortgage other Brokers may not understand to help sell the property and they need not repair anything to sell or be limited to cash buyers only 

I am available to partner and assist with all of the above to help Real Estate Brokers sell more listings, more quickly by marketing them with renovation mortgages.  

Any damaged property can close usually within 30 to 45 days with a renovation mortgage as an alternative to limiting the property to cash only buyers to increase the pool of buyers and potentially the sale price. 

An added feature of any renovation mortgage is that the property will be appraised to its After Renovated Value or ARV by a local Appraiser using the contractor’s written proposal or even the Feasibility Study. The ARV will show the future value of the property after the renovation is completed, after closing. This is what makes a renovation mortgage possible with all work done after closing, knowing what the after renovated value will be in advance, for loan approval.  

The renovation mortgage types are Conventional, VA, FHA, Investor and Jumbo.   

My goal is to educate Real Estate Brokers and sellers on the opportunity renovation mortgages provide to market properties with questionable or dangerous issues of almost any kind and restore them to service. 

For buyers who may comment they would make an offer, but the kitchen is old, but the bathrooms are old, but the flooring is old…now you have an answer for them.  

Down payment and terms shown are for informational purposes only and are not intended as an advertisement or commitment to lend. Please contact us for an exact quote and for more information on fees and terms. All loans subject to credit approval. Rates and fees subject to change. Not all borrowers will qualify. 

Perry Farella NMLS ID755943 

FCM NMLS ID 629700