Adrian Salgado

Remember when I patronizingly stated that “short sale”, “foreclosure”, and “REO” would be THE buzzwords for all things real estate in 2008?

Add another to your repertoire: Rehab Loan.

When used in the proper context, the hint at mentioning two words, “Rehab Loan”, will make you look uber-hip and urban chic in the innocent eyes of friends and recently met acquaintances at baptisms, bar mitzvahs, baby showers, and wedorces (weddings guaranteed to become divorces).

Introduced in 1978, the FHA 203k Loan (aka Rehab Loan) was created to promote and facilitate the restoration and preservation of the nation’s existing housing stock.

In other words, the powers that used to be realized that the creation of the suburb (”there he goes again”) destroyed previously established neighborhoods, caused deep urban decay, and gave birth to the negative connotation now associated with “inner city” and decided they needed to provide incentives to homeowners and homeowners-to-be before things got really hot (no pun intended).

According to those who were already in the biz back when I was sporting Z Cavaricci’s and a bolo tie, the FHA 203k Loan made some noise in the 1990’s, but practically disappeared in the new century when lenders decided it was a good idea to lend Flaco - the handyman who “stated” that he made $180,000/year - $500,000 to buy a 3/2 single-family residence con dos efichen in Westchester.

Fast forward to 2008. The credit crunch, the mortgage meltdown, the slowdown in new construction, the vanishing act of second mortgages in the form of a Home Equity Line of Credit (HELOC), and people like Flaco force the FHA 203k Loan to come out of its shell.

What is the FHA 203k Loan?

Most lenders will not close a traditional loan and release the mortgage proceeds unless the condition and value of the subject property provide adequate loan security (collateral). When rehabilitation is involved, a lender typically requires the improvements to be completed before a long-term mortgage is made.

When a homebuyer wants to purchase a house in need of repairs, the homebuyer usually purchases the property with cash or has to obtain financing first to purchase the dwelling, additional financing to do the rehabilitation construction, and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often times, the interim financing (acquisition and construction loans) involves high interest rates and short amortization periods.

The FHA 203k Loan was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property.

Why the FHA 203k Loan?

In today’s real estate market, a market ripe with bank and corporate-owned foreclosures that sit vacant and often in disrepair, the FHA 203k Loan is just what Betty Ford would have ordered. Why? The mortgage amount of the FHA 203k Loan is based on the projected value of the property with the work completed. In other words, the property’s current condition is not as important as the property’s condition after the necessary repairs have been completed.

The FHA 203k Loan allows homebuyers to purchase downtrodden properties that lenders offering traditional loan products wouldn’t touch with your very own hands.

How can FHA 203k Loans be used?

FHA 203K Loans can be used in one of three ways:

• To purchase a dwelling and the land on which the dwelling is located and rehabilitate it.

• To purchase a dwelling on another site, move it onto a new foundation on the mortgaged property and rehabilitate it.

• To refinance existing indebtedness and rehabilitate such a dwelling.

What improvements are eligible under the FHA 203k Loan?

There are numerous improvements eligible under the FHA 203k Loan. However, luxury items and improvements that do not become a permanent part of the real property are not eligible as a cost rehabilitation.

The following are just a few of the improvements allowed under the FHA 203k Loan:

• bathroom remodels
• kitchen remodels (including permanently installed appliances)
• new exterior siding
• adding a second story to the home
• upgrading plumbing
• upgrading electrical
• upgrading HVAC system
• interior painting
• exterior painting
• bedroom additions
• new flooring
• new deck/patio
• new doors and windows

In Closing

Homebuyers, are you looking to purchase, repair, and/or improve that bank-owned foreclosure that’s “en fuego”, but has a great layout and is located within the boundaries of that “A” school district you so desperately want your underachieving child to be a part of?

Are you looking for the possibility to gain substantial equity from day one (even with current market conditions) with a low fixed rate government backed mortgage?

Don’t let the current condition of that “fixer upper” scare you. The FHA 203k Loan just might be the right loan product for you.

Adrian Salgado is a Realtor Associate at RED I Realty in Coral Gables, FL. He can be reached at 305-491-7179 or SalgadoA@gmail.com.

After a 3-month delay due to something called asbestos, the implosion of the almost entirely-gutted 12-story office tower located at 2801 Ponce de Leon Blvd finally “took place” on Saturday morning:

The smoke:

The smoke clears:

Raul, the lone representative from the Gables Condo Blog to attend the event (the other failed to hear the Urban Theme ring tone of his Motorola Razr at 6:02 am while counting sheep - the Cabernet Sauvignon from the night before may have had something to do with it), described it as:

“Anticlimactic. The first implosion in the history of the City of Coral Gables was a dud. Tripods, 35 mm cameras, digital sophistication, screaming children, frightened adults, champagne sippers, political big wigs, air test samples, loud blasts, blinding smoke…and when it was all said and done, the concrete elevator shaft in the middle of the mostly steel structure was left standing. The puzzling look of disappointment could be seen in the faces of most in attendance. Can you say ‘refund’?”

According to an article in yesterday’s Miami Herald, the good folks at Dykon Explosive Demolition finished off the job yesterday.

The lot will now be cleared to make way for a 15-story office tower that will serve as the office portion of Old Spanish Village, a 7-acre mixed-use community planned for the eastern curve of Ponce Circle Park that will feature luxury condominiums, townhouses, offices and a retail component.

The office tower, to be modeled after a 15th century Gothic Cathedral complete with arches, stain glass windows and steeple towers, is to be developed, owned and managed by Allen Morris Company - the same Allen Morris Company that developed the beautiful Alhambra Towers at 121 Alhambra Plaza. It is destined to become the first-ever “Silver LEED certified” office building in Coral Gables.

LEED is the Leadership in Energy and Environmental Design Green Building Rating System (TM), the nationally accepted benchmark for the design, construction, and operation of high performance green buildings.

For information regarding Old Spanish Village call Raul Estrada at 786-586-5844 or Adrian Salgado at 305-491-7179. If you’d like to know what it feels like to wake up pre-6:00 am on a Saturday morning after a stressful and hectic work week, call an eager and energetic Raul Estrada.

Is vehicular traffic getting more and more congested with each passing day?

Does the price of gas make you think twice about idling in traffic on your way to visit frenemies?

Does the young lady cruising in the Kia Spectra while “texting” her boyfriend and applying Maybelline Pink Diamonds #430 on I-95 scare you more than the thought of a Caucasian president in 2009?

You may be in need of

a secret road.

One that allows your right foot to apply more pressure to accelerator and less wear on brake pads. One that doesn’t take your blood pressure to 160/110 in 3.2 seconds. One that doesn’t make you reach for that double-shot bottle of Black Label resting in the glove compartment (along with plastic spoons from Wendy’s, napkins from Starbucks, condoms from LifeStyles, and other unidentifiable miscellaneous items) in case of emergencies.

This “secret” 6-lane road (3 each way) divided by a “landscaped” median is quickly becoming one of my personal favorites. As a matter of fact, it’s currently in heavy rotation. It provides a north/south alternative to those looking to get from Point A to Point B in the central/eastern part of town without having to deal with the multi-talented chick on I-95 during rush hour.

NW 22 AVE north of SR 112 is my secret road of the moment.

What’s yours?

Adrian Salgado is a Realtor Associate with RED I Realty in Miami, FL and can be reached at 305-491-7179 or SalgadoA@gmail.com.