Valencia, CA

The streamline 203k is a perfect program for REO properties with minimal repairs.

Did you know you can tell the bank that they will not be responsible for the repairs? WOW! The bottom line not to mention the headaches, just looked a lot better! And that FHA buyer that didn't look so great, just went from mediocre to a GREAT offer!

The FHA 203k Loan allows for the client to finance the cost of repairs needed on a property into their mortgage. The repairs are done after closing so this is an advantage to the seller or bank that owns the property because they aren't responsible for the repairs. This is a great negotiating tool for your client who may be up against other offers which would require the seller/bank to do the repairs! Are there any foreclosed properties out there in need of repair? I think so! This is perfect for those REO properties that have missing appliances or plumbing and electrical repairs needed!

STREAMLINE 203k for dummies

The Streamline 203k is for limited repairs requiring little expertise to manage therefore there is no consultant required (Although it depends on the extent of the repairs, I may recommend you get one anyway - It's worth the cost!). It is designed for a "streamlined" project where the home can be occupied immediately after closing, and the contractor will receive a single payment at completion. (Maximum of 3 contractors) The maximum amount that can be financed on top of the sale price for the streamline is $35,000 (which includes some fees/reserve/costs) so assume about 30,000 in actual repairs.

Below are the Eligible and Ineligible repairs for the Streamline K

ELIGIBLE:

1. Repair/replacement of roof, gutters and downspouts
2. Repair/replacement/upgrade of existing HVAC systems
3. Repair/replacement/upgrade of plumbing and electrical
4. Repair/replacement of existing floors
5. Minor remodeling, such as in the kitchen, which does not involve structural repairs
6. Exterior and interior painting - including lead-based pain stabilization.
7. Weatherization: including storm windows and doors, insulation,, weather stripping, etc.
8. repair/replacement/upgrade of appliances (may include free-standing ranges, refrigerators, washer/dryers, and microwaves)
9. Improvements for accessibility for persons with disabilities
10. Repair/Replace/add decks,patios and porches
11. Basement finishing/remodeling/waterproofing (not requiring structural repairs)
12. Window & Door replacements and exterior wall re-siding.
13. Septic and/or well repair or replacement

INELIGIBLE:

1. Major rehabilitation or major remodeling, such as relocation of a load-bearing wall.
2. New construction, including room addition.
3. Repairs of structural damage.
4. Repairs requiring detailed drawings or architectural exhibits
5. Any rehabilitation activities that require more than two payments per specialized contractor
6. Landscaping or similar site amenity improvements
7. Any repair or improvement requiring a work schedule longer than six months
8. Work items that would necessitate a consultant to develop a work write-up
9. Work that would cause the borrower to be displaced from the property for more than 30 days during the time of rehabilitation
10. All items ineligible for the Full Consultant 203k

This works the same way as the Full Consultant 203k program but can be done in less time. We recommend at least 90 days for the Consultant K program and 45 for the streamline.

The banks want to unload their inventory as quick as possible and with the least amount of costs. Educate your clients which INCLUDES the bank about this program and close more deals. This is also a great way to negotiate a short sale if you have a qualified 203k buyer. But just remember -give it the time it needs and set the expectations up front. This is why having a certified FHA 203k Lender with experience with this program is crucial.

This program can also be combined with the Energy Efficient mortgage for those clients that are GOING GREEN!

There are so many options and I would be thrilled to help you find the right program that most people don't even know exist!

Happy Rehabbing!

Carl Reese Construction Santa Clarita, CA
Certified NACHI© Home Inspector • EnergyStar© Partner • Certified Mold Remediation & Testing • Certified Thermographer • Energy Consultant • Licensed General Contractor #B878946

203k MADE SIMPLE?

Ok, maybe not, but I will attempt to make it as simple as possible for the client to understand and want to read on. For many of us in the business who are " in the know" we forget that we need to go back to the basics and spell it out in simple terms for others to understand. So I've compiled some information based on my most recent commonly asked questions just this week.

In Southern California, FHA loans were just not utilized over the past 10 or so years because of the FHA Maximum Mortgage limits But now that the limits have been increased and the prices have decreased, FHA loans have become the most utilized loan in recent months. HOWEVER, because it was not a popluar loan, you would be amazed at how many lenders/brokers do not know what they are doing. Especially when it comes to the 203k loan. I spoke to a client today that was given such mis information it made me cringe.

Apparently they told the client that 203k loans were no longer being done (Gee, you think it was after realizing that they had no idea what they were doing?) and they tried to flip them into another loan. This was after telling my client that their loan amount would be for the contract price and the extra money would just be separate and sit in an impound account to be disbursed over the next 6 months. Ok partially true, the extra amount would be in escrow to be disbursed as the remodel progressed, but for free? Who pays for the extra 50,000 dollars you just borrowed for repairs? Your loan amount is for the entire amount you are borrowing. Makes sense right?

So what is a 203k loan and why use one?

When a buyer wants to buy a home that needs repairs utilizing FHA financing, normally the repairs would have to be completed prior to the close of escrow. The repairs would normally fall on the responsibility of the seller. With so many foreclosures in today's market, the bank is the seller. And many times the home in need of repair is listed "as is". Which in the past would require a cash buyer or conventional financing. This is another reason that people in the business decided to shy away from FHA loans. I believe it was pure ignorance of the programs that were available by the brokers and the realtors couldn't properly prepare their seller for what to expect that gave FHA loans a bitter taste.

My associate Jeff Belonger said it best in his post about ignoring what your listing agent tells you about FHA loans

Here we go....203k loans for dummies

* 203k loans allow you to FINANCE the cost of the repairs in the new loan amount. (Not to exceed 110% of the after improved value determined by the appraiser and 203k consultant) What does this mean? I buy a house for 200,000 that needs 50,000 in repairs and I can borrow the extra 50,000? Too good to be true? NOPE. That's it in a nutshell....

ok details please.........

* Down payment is based on the sale price PLUS the final cost of the repairs x 3.5% so for example:

Sale price is 200,000 (DO not calculate 3.5% on this) PLUS 50,000 in repairs/costs (which includes certain costs and reserves the lender will require) 250,000 x 3.5%. Down payment is $8750.00 (closing costs are separate as usual)

* Buyer will hire (lender can recommend) a HUD approved FHA 203k Consultant to go to the property with the buyer to determine the required repairs and wish list repairs.

The fee charged by the consultant can be included in the mortgage. The fee can range anywhere between $ 400 to $1200 depending on the repairs required. Please check with the consultant prior to scheduling your appointment.

*Buyer will obtain estimates from several licensed contractors for the work to be completed depending on how extensive the repairs.

Three estimates are recommended for each contractor but not necessary. The buyer can act as their own general contractor only if experienced and licensed. (FHA says experienced, but most investors require the buyer to be licensed) The contractors must provide documentation to be approved by the lender prior to approval.

The consultant will determine the "required" repairs versus the "wish list repairs". You must start with the required repairs and then move on from there for you wish list. This is an important step for the consultant and appraiser so that you don't over improve the home and exceed the comparable properties in the area.

Eligible Repairs

1. Structural alterations and additions
2. Garage (attached /detached/new)
3. Remodel kitchen or bathroom
4. Install appliances
5. Changes to eliminate deterioration and reduce maintenance
6. Repair swimming pool (up to $1500)
7. Modernize plumbing/heating/air conditioning/electrical systems
8. Install or repair roofing /gutters/downspout
9. Install flooring /title /carpet
10. Energy conversation improvements
11. Major landscaping /decks/fencing
12. Improvements for accessibility ( e.g. handicapped ramp)
13. Interior and exterior painting
14. Improvements that are a permanent part of the real estate

Ineligible Repairs

1. New Tennis court
2. Gazebo or bathhouse
3. Additions or alterations to provide for commercial use
4. Photo mural
5. Television antenna or satellite dish
6. New Swimming pool
7. Outdoor fireplace/hearth/barbecue pit (Sorry to those of you in California! Sob)

* Once the consultant completes his report of required and wish list repairs, the lender will forward it to the appraiser for an "After Improved Value". This is where you may run into problems with OVER improving the property based on current values. Between the consultant, appraiser and buyer - the FINAL FINAL report will be tweaked to come up with a final report that the contractors will be hired to do.

* So now the file is submitted to underwriting and approved ( you need to qualify at the full amount you are borrowing of course, which may include your current mortgage payment for the home you will live in during the rehab period) and the normal steps for closing will occur.

(BIG PLUS - you can include 6 months of mortgage payments in the new loan amount since it's assumed that you will have TWO housing payments during the rehabilitation of the new home. This money will be deducted each month during the rehab process) This is optional.

* Closing occurs, and the work begins within 30 days of closing/funding. (This is when your mortgage payments start since this is when you started borrowing the money - however, if you included the 6 mths mtg payments, they will be deducted from escrow starting when your first payment is due)

* Disbursments are made throughout the following 6 months from the escrow account (normally 4 draws with one final inspection, but this can be increased for higher repair amounts) as the work is completed.

Remember you paid the seller for the price of the home, and then you borrowed an additional amount of X which is sitting in an escrow account to pay the contractors (your total loan is the total amount you borrowed)

Once the last disbursement is made and the final inspection showing COMPLETED AS PER THE CONTRACT........you are done! Simple As 1 2 3 - okay maybe not, but that's why having an experienced lender on your side is crucial!

There are specific properties and repair requirements for this type of loan, so please call me for specific details if this sounds like the right loan for your new home.

Please send me your before and after pics! I would love to see them and maybe even post them for people to see what can be done with this awesome program! Or contact Colleen Craig FHA 203k Specialist for more details

Happy Rehabbing!

I was in a meeting with about fifty realtors the other day who had not even heard about the hvcc petition!

We can't assume that everyone has heard about it - as a matter of fact it's obvious the word has not gotten around since there are less than 50,000 signatures. OR have you heard about it but chose not to take the two minutes to sign it? I personally have forwarded the petition to all my current and past clients and asked them to sign it.

So for those of you who STILL have not heard about it, I will make it simple:

HVCC stands for Home Valuation Code of Conduct.

It was put into place to help curb the potential for fraud with respect to the valuation of residential properties.

This has changed the entire process for banks and mortgage companies to order the appraisals from the professionals that they have trust in from their proven track record and have built a relationship with over the course of their career.

1. We can NO LONGER order conventional appraisals from our trusted appraisers. We now have to go through a third party company that will order the appraisals from appraisers who are willing to work for less b/c the middleman (third party company) takes 40% of the fee. Honestly, don't we get what we pay for? I don't know any experienced appraiser that would be willing to cut their income by 40%. Alot of them are now froced to get out of the business.

2. The appraiser does not have to be located anywhere near the property that needs to be appraised! Would you feel comfortable with an appraiser coming from 200 miles to do your appraisal? This WILL affect your transactions people - don't just assume that it's the mtg company's problem.

3. We can NO longer have ANY contact with the appraiser! WHAT? Ok an appraisal comes in low with inaccurate information and we can't fight it? I personally had one where the appraiser knocked the value down 15,000 b/c he was using comps for a condo that sat right on the 101 freeway with DOUBLE windows (not double paned) and was in a far inferior neighborhood when there were plenty of comps supporting the property my buyer was buying. I sent emails and voicemails to try and discuss this inaccurate information and was completely ignored. I then found out that he never even went to the property!

4. If the loan needs to be submitted to a second investor for any reason, a whole new appraisal has to be ordered - resulting in additional fees to the consumer.

Ok this is just a brief overview of what the hvcc is -As of now because of all the problems, there is legislation requesting an 18 month moratorium on the hvcc. But we need more signatures to have it permanently reversed.

PLEASE GO TO WWW.HVCCPETITION.COM and help YOUR future business.

Most of you know that the Santa Clarita real estate inventory of homes for sale is quite low right now, almost approaching 600's. This is apparently holding true for the Tesoro Del Valle master planned community, which is located at the northern edge of Valencia.

I was browsing homes for sale in the Santa Clarita MLS, for a specific client, and was amazed to see that there was ONLY 1 home in Tesoro Del Valle that's actively for sale, that is a regular sale or foreclosure. I didn't even restrict the search to price, size, bedrooms, etc...I just queried for regular sales and foreclosures, and NO shorts sales.

Click here to view the sole, regular/foreclosure for sale in Tesoro Del Valle (it happens to be a foreclosure by the way).

What's even more interesting is that there are 39 Tesoro Del Valle homes in escrow! Amazing! So there is a lot of interest in these homes, and quite a few homes for sale - it's just that they're under contract! Click here to view details on these 39 Tesoro Del Valle homes that are in escrow.

And if you want one more factoid that's possibly a bit more interesting than the last - it's that of those 39 homes for sale in Tesoro Del Valle that are currently under contract and in escrow...28 of them are short sales!

The kicker - regular sales, and bank owned sales in Tesoro Del Valle, and Santa Clarita as a whole for that matter, are hard to come by! It's obvious that people en mass are writing offers on short sales. That happens all the time. True. But many of these escrows (of the 28) really will not turn into a real sale. It will end up back on the market, due to the buyer getting tired of waiting for the bank to approve/finalize the deal...and or it will come back onto the market as a bank owned home perhaps if the short sale bid fails - as too many do. Just because the Realtor takes the home off of the market, and puts it into escrow, does NOT mean that they have the short sale approved and, for that matter, the price they marketed the home at approved.

If you're looking for a way to find out the regular sales in Tesoro Del Valle, and bank owned homes in Tesoro Del Valle....before other buyers are even made aware of them, please give us a call, so we can give you somewhat of a competitive edge! It's obvious from the 39 homes with offers/under contract JUST in Tesoro Del Valle, and the minuscule active inventory of homes for sale in Santa Clarita - that there is quite a bit of competition for these homes out here...and possibly for the home you may be vying for.

 

The Robert and Brian Team

Call us @ (661) 964-1760 for immediate Santa Clarita Real Estate assistance!

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