203K World - Washington DC's & Suburbs DC's #1 Renovation Lender / AS-IS-EZ

FHA 203k Loans - Washington DC, and surrounding areas.

You are in my backyard! SO??? You get a "backyard discount".

Catch? :

• 'Loan Amount' must be above $300,000.00
• Must be a renovation loan.
• You must settle on this loan in order to receive a complete "Lender Credit" equal to all charges my company would typically charge.

YOU LITERALLY GET THIS LOAN WITH ZERO LENDER FEE!!!

Call today before the program is GONE! ;)

203K World - FHA 203K

How to make an offer on an "As-Is" property.

Situation:

You found a home in the neighborhood you would love. The lot is perfect and the house is great, except, once you get inside, you see it has the kitchen ripped out, the HVAC was taken out of the home and there is a MOLD EXPERIMENT in the basement that would make the local botanist club jealous. What do you do?


Questions:

1. How do I really know what's wrong with the house - More wrong than just what I can see?
2. How much will it cost to fix it?
3. How do I come up with a proper offer price, if I don't know how much it will cost to fix???

These are all legitimate questions buyers face today all throughout the country. Just "HOW" do I make an offer on this home, where My INTERESTS ARE PROTECTED and I DON'T PAY TOO MUCH???

Solution:

1. Do a complete BALLPARK on the estimate. If you know a friend who is a contractor, perhaps your agent has someone in mind, ask your lender... SOMEONE will know how to do this estimate. (If you can't find anyone, make the list of ballpark repairs and send them to me - I will give you a basic estimate). We EXPECT this number to change.
2. Ask your Agent to do a CMA (Comparative Market Analysis) for the home as completely renovated and in great condition. You want to know the value when fixed to your standards!
3. Follow the Math Below:

Example

CMA - Value When Completed $400,000.00

10% Acquisition (estimated) - $ 40,000.00

Renovation Estimate - $ 50,000.00

Expected Equity ( See below) - $ 40,000.00

_________________________________________________________

Offer Price $ 270,000.00

* These are all variables and can be adjusted to your specific area

"Expected Equity" - This is the amount of Equity (also known as "Sweat Equity") you would hope to gain by buying a less than perfect place and doing the renovation yourself. There is a risk with buying an "As-Is" property, there is work to do, WHY PAY FOOL PRICE??? If you would, just buy something turn-key and ready to move into, where you could hold the seller responsible for repairs of any deficiencies.

CONTRACT TERMS:

• "Inspection Contingency" - It's better to give yourself more time to do inspections, rather than rush the process. 14 days is MINIMUM, 21 days best. You don't want to specify multiple/itemized inspections. This makes the asset managers nervous (Lead paint, mold, well/septic, termite, mechanical, environmental, etc...). Better to just use a catch all phrase and this covers you, " Buyer will have the right to do any necessary inspections during said Contingency Period".
• OUT - Ensure you have the option to withdraw the offer/contract for any reason during the Contingency Period with the right to have your Earnest Money Deposit fully refunded.
• FHA Amendatory Clause - Must use FHA Addendum, however with the renovation loan, you can't fill in the sales price in the typical blank space. This basically says so long as the home appraises for the sales price, you (and FHA) are okay with this. This is not the case. It must appraise for Sales price + Renovation. Best option is to strike the Amendatory Clause from the FHA Addendum.

OUTS / WHAT IF'S ?? :

• What if the renovations are more than we expected after we do our inspections/estimates for repairs?

If this is the case, you will have the reports to substantiate your claims of the deficiencies AND you can re-negotiate your price lower, based on your findings. To what number??? Easy, just use formula again, with the actual renovation amount.

• What if the repairs are MAJOR (structural, environmental, bad well/septic, etc...) and more than we bargained for?

So long as your discoveries are during your "Inspection Contingency" per your contract offer, you can withdraw your offer for any reason and have your Earnest Money returned. (assuming your contract was written so).

• What if I can't find a contractor to do the work in time? - Clock is ticking on your contingency. YOU MUST get started with your inspections as SOON as you hear word of your contract acceptance. Start lining up contractors for vetting ahead of time. REMEMBER - If you go beyond the contingency period, you LOSE YOUR HAMMER and can't withdraw for any reason.

CLOSING:

This isn't a perfect system, and doesn't apply to all circumstance, however, this will get your close on your offer, with all the unknowns you are dealing with. If you have any questions, just give me a ring. I would be happy to assist!

GO OUT, buy houses, make equity, enjoy your life! It's much too short. ;)

b

Your FHA 203k Specialist.

* Full 203K Loans

* Streamline FHA 203ks

* Repair Escrows

* Draw checks in 24 Hours.

* You may qualify for our "Free-k" loan, with ZERO fees

* Lowest Interest Rates available on renovation loans.

Subject: VA Changes

September 22, 2011 Inside Lending Bulletin

VA Funding Fee Changes Effective October 1, 2011

Vets and Reserves/National Guard will get a significant benefit October 1st. Check the chart below to see how much they’ll save in fees. We hope this helps you help our military folks become homeowners! If you have any questions about this or a specific situation, please don’t hesitate to email or call. Thank you.

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	Brent Kluge Mortgage Banker 1954 Greenspring Drive, Suite 625 Timonium, MD 21093 Office: 800.330.1330 Direct: 410.427.0588 Mobile: 410.591.8300

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When you represent a buyer and they are interested in offering on an "As-Is" property, should you do your inspections to figure out what is wrong first, or just make an AS-IS offer?

This is the quandary...

All too often, I hear this question and the answer is... THE BUYER WILL DICTATE.

I would advise you to counsel your buyer that there are two main options:

1. Do inspections/estimates before making your offer.
2. Make the offer and contractually, give yourself some time to do your due diligence.

Lets look at some of the PROS / CONS of each:

Option 1: Do Inspections/Estimates before making your offer

"How can I make an offer on a house when we have no idea what is wrong with it?" Tough one to answer. In this environment, there is an abundance of foreclosed properties in some form of disarray. The BPO that was done set the price very close to the value of a property in great condition, so we know not to offer that much, but just HOW MUCH LESS?

You start your battery of inspections:

• Home Inspection
• FHA 203k Consultant or Project consultant
• Termite
• Radon
• Well/septic
• Structural
• Mold
• Mechanical (Electric,plumbing,hvac)
• Contractor (you want to get some estimates to know how much someone would charge to remedy these issues)

Do some quick math and just figure out how much money you spent and time for all parties involved... INCLUDING THE AGENT, opening the doors!




Option 2: Make the offer and contractually, give yourself some time to do your due diligence.

All contracts have some form of an "AS-IS" addendum. This says Buyer is buying the home AS-IS and has the right to do all necessary inspections for ____ amount of days after contract ratification. Additionally, I would look for language that gives the buyer the right to withdraw from the contract with no recourse, during this contingency period, and have all earnest money returned.

In this example, my advice would be to ASK for at LEAST 14 days, and if the property is unique (multi-unit, known major deficiencies), I would ask for 20 day contingency period. You will find most asset managers want to counter with a smaller time frame, sometimes 7 or 10 days. Just know, if you don't have a chance to fully do your due diligence, you can do an addendum that extends the contingency for that specific inspection item.

PROS / CONS:

Option 1:

PROS

• You have a thorough knowledge of what needs to be repaired to make an completely educated offer.
• Project planning is completed upfront, so you are ahead of the curve - could settle sooner (30 days).
• You have inspection reports to submit with your offer to justify a lower sales price.

CONS

• Seller not likely to cooperate (turn on utilities, de-winterize).
• NO GUARANTEE you will get ratified - Wasted time, inspections, money - VERY frustrating.
• Wasting time - While doing all these inspections, another offer could come in and you are out.

Option 2:

PROS

• You're not spending time/money without being under contract - No chance of someone else getting the contract / A LOT LESS times agent has to open the doors!
  
• Seller more likely to cooperate with inspections - Utilities on, disclosure, allowing specific inspections.
  
• You can "RE-NEGOTIATE" a lower offer price and substantiate with inspection reports - NOW known issues are material fact!

CONS

• You are under the clock - GET THE INSPECTIONS STARTED IMMEDIATELY!
  
• Lots of moving parts required in a short period of time - Be prepared, Plan, Communicate, Set Expectations BEFORE you are ratified.
  
• Contractually, a slightly "weaker" offer in the eyes of the asset managers compared to another offer with ZERO inspections or Cash AS-IS offer.

Moral of the story:

In my experience, Option 2 seems to have worked best for all parties involved, however, you must never forget : REPRESENT YOUR CLIENT - PROTECT YOURSELF!

INFORM THEM OF THE OPTIONS AND LET THE CLIENT CHOOSE!



Go buy houses, renovate, make equity, enjoy life! :)

b