While it’s true that many buyers can’t see past a home’s current condition and visualize what it can be but buyers who do have that vision can reap the rewards of numerous Contra Costa real estate bargains.
Picture this….The house is awful, the kitchen and bathrooms haven’t been updated in 20 years, the orange shag carpet is horribly stained, the flowered wallpaper would give you nightmares and the amount of deferred maintenance throughout the house is beyond daunting. You can see the potential and could easily afford the house at the bargain price but you don’t have the additional cash to upgrade it to a nice home. Should you walk away and find a more expensive, upgraded home that won’t cost extra money out-of-pocket? Not yet! Neglected, ugly homes are often priced below market and can be purchased and renovated with a single FHA 203k Rehabilitation loan.
The minimum down payment for a FHA 203k Rehabilitation loan is 3.5% of the cost to purchase plus the cost to improve and you get to pick everything to suit your personal taste! Check out this example:
This is the original kitchen of a home purchased using the FHA 203k mortgage. The wall between the kitchen and great room (the wall on the right side of the picture) was removed to create a “great room” feeling. New recessed lighting, new outlets, new silestone counters, new sink, new appliances (included changing the stove from electric to gas) and more.
Construction is almost complete in this picture. All that remains is to replace the door to the garage, paint the walls and add the pendant lights over the counter.
FHA has another nifty option that can be combined with the rehabilitation loan – the FHA Energy Efficient mortgage. This allows 100% financing of energy efficient upgrades subject to a Home Energy Rating System analysis. Think of it, $0 dollars out-of-pocket for utility savings over time!
I know the question you are asking, “If this program is so great, why isn’t everyone doing it?” Easy answer……it takes extra work from both the Realtor and the buyer. The Realtor must have the skill-set to assess the Cost to Renovate with reasonable accuracy and have a network of contractors in place to quickly obtain accurate bids for all the work to be included in the renovation. The buyers need to compile a firm list of upgrade preferences from flooring options, paint color, kitchen cabinets and counters, bathroom accessories and even light fixtures – but the good news that your list can be compiled in advance of finding the right “fixer” and writing an offer.
If a listing says Fixer, Needs TLC, Contractor Special, Cash Only or equivalent, you can purchase it with a Rehabilitation loan!
Important note: The FHA 203k Rehabilitation program is for buyers purchasing their primary residence. If you are interested in purchasing a real estate bargain for your vacation home or an investment property, a conventional rehabilitation programs is available.
We invite you to call or email if you are interested in learning more about purchasing and renovating a real estate bargain.
© Wendy Cutrufelli, Contra Costa Real Estate Resource
