CENTURY 21 Village's blog

Loan Program Provides Purchase and Rehab Funds in One Package

Interested in purchasing a foreclosure, short sale or other home that needs work? Then you need to know about a special loan program administered by the Federal Housing Administration.

The Section 203(k) program provides approved borrowers with the funding necessary to not only purchase a home but also to rehabilitate or repair it. Normally, when a buyer purchases a home in need of repair, he must first obtain financing for the purchase and then get additional financing for the rehab. The 203(k) program was designed to eliminate the hassle and cost of two separate loans.

The 203(k) program has become increasingly popular over the past year because so many properties—particularly those under foreclosure—are in need of repair.

Here are some details on the program:

• The home financed must be at least one year old.
• Part of the loan proceeds are used to pay the seller (or if used for a refinance, to pay off the old mortgage) and the rest are held in an escrow account and released as the repair work is completed.
• The cost of the rehab must be at least $5,000, and the total value of the property must fall within FHA mortgage limits for the area.
• One- to four-family dwellings and condominium units are included (if the condos are in approved projects). Coops are not eligible.
• The repair work can range from minor repairs (as long as they cost $5,000) to virtual reconstruction. Luxury improvements are not eligible.
• Applications must be submitted through an FHA-approved lender.
• Investors are not eligible; the property must be owner-occupied.

For more information on 203(k) loans or available properties in your area, contact our team of REALTORS® at CENTURY 21 Village Realty at 626.355.1451 or via email at homes@c21village.com

Offers That Sticks

Home Edition | News From Your REALTOR®
Elyse Umlauf-Garneau

The phenomenon of multiple offers, a situation in which multiple buyers submit bids for a house and end up competing for it, has returned.

It was prevalent in the strong market a couple of years ago and, now, with dropping prices, some sweet deals on distressed properties, relatively low interest rates, and an $8,000 federal tax credit for fi rst-time buyers and a $6,500 credit for repeat buyers, some markets have heated up again.

In fact, California practitioners report an explosion of competitive bidding, and in some places supply actually is shrinking and prices are ticking up.

The result is that some buyers who are anxious and able to enter the market still are losing out. For example, Andy Bencosme, 2009 president of the Arcadia Association of REALTORS®, says one of his clients has bid on—and lost out on—12 properties.

Wondering how to prepare? Keep in mind:

• Competent advice: Seek REALTORS® who can explain how competitive a market is, and where you fi t with it, and who are able to prepare you for the process—and potential disappointments—ahead.

• Investor competition: You may be competing with investors delivering contingency- free, all-cash offers. Be prepared to deliver your best offer, if need be. Also, get prequalifi ed for loans, have all paperwork in Order, and know precisely how high you can afford to bid.

• No automatic low balls: Despite market challenges, don’t automatically make offers dramatically below asking prices. If you’ve been eyeing a property that has seen multiple price reductions and you’re ready to jump, others likely have been doing the same. It makes for stiff competition. “Some think that if an asking price is $325,000, they can get that house for $250,000. That’s not the case,” comments Bencosme. Study neighborhood comparable properties that are for sale and that have sold and consult with your REALTOR® to develop strong, realistic offers.

• Buy less: Just one reason to look at property below your means is that you’ll have money in reserve to bid up if you need to.

• Short sales: The process can be tedious and lengthy. One California REALTOR® says short sale acceptance dates can run two weeks to six months. Negotiating short sales can be tricky, so be certain your agent is experienced in the process. And know whether you have the stomach for such a route.

• Bank-owned property: Again, you may be competing with investors. Work with your agent to determine properties’ worth.

And Bencosme suggests making yourself as attractive as possible. That may entail offering a larger down payment, not requesting closing cost assistance, or agreeing to a shorter timeline.

“The more you have your ducks in a row before making an offer, the more sellers will see you’re ready, willing, and able to complete the transaction,” he says.

Reprinted from California Real Estate Magazine

January/February 2010 pg. 34