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Renovation Loans or Repair Escrows

We hope you are enjoying the full peak of summer!

On Sunday I finally noticed the honeysuckle growing on the side of the Broken Arrow Expressway, and also noticed that honeysuckle is a great metaphor for my childhood summers in Tulsa. The cooling treat on the path of every summer stroll. You pluck the petals in one smoothed motion, using the surgical precision required to plunge ALL of the juice. Then, it left you wanting more.

Sometimes our clients see great homes, but sometimes they still want more. This is why people love to buy real estate and why I love renovation deals.

Chronologically speaking, great renovation deals start in the listing presentation. And just like any deal, great renovation projects require abundant levels of “expectation management”.

Home kitchen before renovation


Thus, in the spirit of helping you sell more homes faster, we’ve included a list of questions and answers, so you can illustrate options that get your clients imagining. Have you found yourself in either of these situations?

The sellers want to sell a house “as is” and do not want to spend a single penny selling it. You know some repairs are going to need to be made. Position yourself as the authority and let them know what their future holds: their pool of buyer opportunities will be very shallow unless we handle X,Y and Z.

Or, is it the buyer we are consulting? They have identified a near perfect house, but it lacks something: kitchen isn’t up to par, the roof is worrisome, needs more insulation, or they wish it had a pool.

Home Kitchen Renovation


Here are some questions to keep in mind:

1. Could they escrow for it?

This is a great solution if the seller is willing to make the repairs and/or upgrades, but they want to be reimbursed at closing.

2.What about FHA buyer funded escrow holdback? 

Simply this, the buyer borrows for the sales price + holds extra funds aside for repairs after closing, and only pays one loan payment.

3.    Is a HUD REO program available? 

This may be available if the mortgage product is FHA and the appraiser requires minimum repairs under $5K

4.    Can we add it into the contract as a seller funded item? Even when it costs them nothing?

If they’re using a VA loan we can. The VA will allow repair escrows of up to 100% of improved value (sales comparison approach). Since it is a 100% loan, why not write the contract in an advantageous way.

5.     Would the repair be classified as an improvement to the homes efficiency?

Many mortgage products offer an EEM Feature (E.E.M. stands for energy efficient mortgage). These popular credits allow for the replacement of appliances, utility components, and sometimes even the windows and doors.

6.     Of course, there is always cash?

But when mortgage rates are so low and money markets are gaining, isn’t there always a better use for cash? Borrow low and invest high, right?

As you finish your summer, please remember the honeysuckle, and keep reaching for more!


Copyright 2015 John Regur All Rights Reserved – Originally Posted at: Tulsa Oklahoma Mortgages – John Regur

Posted in: Remodeling

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