Yesterday I attended a seminar on FHA 203(K) rehab loans. I wrote about these from the buyers perspective back in August in my blog post “FHA 203(K) loans great for buying homes that need work“.
FHA 203(K) rehab loans should also be considered by sellers with homes that need work. By paying up front for an FHA inspection, sellers may find that the estimated costs for rehabbing their home combined with a good sale price could make the home attractive to buyers who wouldn’t consider it otherwise.
Here’s an example: Let say a home is worth $300,000 “as-is”. It hasn’t been updated in many years. The FHA inspector’s estimate for updating the home to make it comparable with other homes selling in the area is $80,000. If the appraised value of the updated home is at least $380,000, buyers can use an FHA 203(K) to finance the purchase of the home and the updates.
Being able to present rehab costs to buyers and how they can finance those costs with as little as 3.5% down is a way to differentiate a home needing work in this challenging market for sellers.
Buyers won’t have to worry about what the updates will cost because an FHA inspector will have already estimated the costs and will be checking the work of the licensed contractors as it progresses.
If you’re thinking about selling a home needing work and would like to know more about utilizing this program to help sell the home, contact me.
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Can this program be used for condos?
Good question, Chuck! Yes, but only if the condos are FHA approved. The FHA is also requiring condos that previously were approved to get reapproved, so don’t assume that a condo that is approved today will still be approved 2 months from now.