Renovation Loan FL Seawall Repair Saves Transaction and Adds Instant Equity

Renovation Loans can often save the day when a deal is on the ropes. I had a Conventional Renovation Deal this summer that closed without a hitch once we solved the problem of a Bank Owned Foreclosure that had a seawall that was in need of replacement. The loan was being marketed as cash only since regular financing wasn't an option without a large escrow, if at all. The way it works on work escrows is that you need 2.5x the cost of the work put into escrow for the work to be done after closing.

The amount of work needed to replace the seawall was about 25k so about 63k would be needed if we were going to go the escrow route. In general underwriters do not like to have loans close with an escrow, especially one so large. The purchase price was in the 400 range. The rule of thumb is if the amount of work is greater than 2% of the purchase price the escrow requests have trouble getting an approval. The other component to getting an escrow approved is that the needed repairs can not be safety related. Since seawall damage often leads to structural damage if left in a state of disrepair too long, the odds of getting an approval on the work escrow were not high.

The beauty of this Conventional renovation loan was that it was on a second home. This wouldn't be possible on a FHA 203k renovation loan or a FHA 203k Streamline renovation loan even thought the amount of the work was less than the $35,000 allowed under the Streamline K renovation program. The FHA loans are only available for a primary residence.

This house was on the water in Broward County in the Pompano area. In addition to the seawall it also had a boat dock attached to the seawall. As with many renovation loans I do, since the only other offers were cash deals and lower than the price my buyer was offering, the price the borrower got was very attractive relative to the appraised value. Based on the after improved value with the seawall repair included the ending value was in the mid 500's. The value was over $100,000 greater than the amount of the purchase price plus the cost of the repairs! Not a bad buy in a otherwise tough market in South Florida!

For more information visit Reno-Mike.com

Or call me at 561-262-5366 on my cell or 561-616-2661 direct at work.

This Blog is my opinion and does not represent the views of my employer Wells Fargo Home Mortgage in any way.

Here is a video below with an example of a damaged seawall (not the one in this blog).