203k – Real Estate’s Best Kept Secret

There is a big problem for me attempting to be a writer and a sales person. All the left brain logic and paperwork activity associated with selling overshadows my right brain writing creativity. The proof is below in this no nonsense overview of a loan program that I love, the 203k. There are no anecdotes, vodka references, or tales from the field, BUT it’s good info. And I believe if the word gets out and more people take advantage of these house renovation programs, we will see even more improvements to the real estate market.

Something that I think has really helped improve the state of the real estate market today is the 203k loan. Early on, when we saw an increase of foreclosures and homes that required certain repairs completed to get them to the closing table, there were no options to get those repairs done. Buyers and Agents alike were frustrated because there was such a big inventory of houses for sale, but red tape and catch 22s prevented qualified buyers from purchasing them. Then along came the “new” 203k loan.

Only guess what. It wasn’t new at all! According to hud.gov the 203k has been around for more than 30 years. It just wasn’t being used. The ridiculousness of the situation a few years ago, at a time when I was grumbling, “This is the stupidest thing I have ever heard!” must have jogged someone’s memory, “203k! duh!”

See, the situation was there were all these great foreclosures. Some needed a little bit of work and some needed a lot of work. But the banks who owned the properties, Hud properties included, did not allow even the smallest repairs to be done to the property prior to closing. The problem with that is that regardless of the extent of repairs, the lending banks would not allow us to close without certain repairs being made.

So there we were. Great houses for the picking. Well qualified buyers ready to buy. Stopped dead in our tracks by some mold in the basement, a leaky pipe, or broken window. It was very frustrating. Then I heard about the 203k from an out of town loan officer who was working with my buyer. When I asked around town at that time, no one was offering it. But now it is used on half of my transactions.

What is the 203k rehab loan?

The 203k allows the buyer to obtain extra funding to pay a licensed contractor for the repairs necessary to meet FHA loan requirements, and make those repairs AFTER closing. This way we don’t have to fight with the sellers to allow us to modify the property beforehand, AND the loan is able to close up neater and faster since we don’t have to wait on repairs to get our approval to close. It is a brilliant program and makes so much sense that it baffles me it is taking so long to catch on.

To this date there are not many loan officers servicing the 203k loan, which is unfortunate because there are a lot of uninformed buyers out there losing out on properties well suited for them because they are not being provided all their options.

If you are a buyer and thought that you were unable to take advantage of the great prices on homes that need some repairs, or have found a house that you love but have been led to believe it is out of your reach because of repairs or updates, don’t give up. Talk to a ChangingStreets agent about the 203k loan. And if you’re just getting started shopping, ask your lender if they do 203k loans. There are so many diamonds in the rough out there and a rehab loan, such as the 203k, is your key to taking advantage of one of these great bargains!