Managing Money and Small Repairs with the FHA 203k

Posted on September 14, 2011 by Chris Ognek

There is no doubt, the FHA 203k loan can be a deal saver.  If often happens that a home inspection reveals some minor but relatively expensive repairs that neither the homeowner nor the buyer can afford to pay cash to repair.  In many cases, using the FHA 203k loan could be the only answer – like for an HVAC or water heater replacement.  The FHA 203k is perfect for that.

There are times, however, when it may not be the best idea to use the FHA 203k to keep the deal together.  This is where savvy financial management comes in to play – which is a really useful skill, especially when you make the FHA 203k part of your business.

The minimum repair threshold for an FHA 203k loan is $5,000 but let’s say the repairs aren’t lender required and don’t really affect the livability of the home, like deffered maintenance or blown window seals.  In those cases, I work with my clients to put an alternative financial plan in place instead of using the FHA 203k.  One examples is simply to save up the cash over the coming months.  A second strategy is to use a credit card, preferably a zero percent or low rate card, and then pay off the debt with an aggressive, disciplined plan.

Taking an approach in lieu of using the FHA 203k can help the deal close faster with less hassle and can save your clients money in the long run.  Some lenders will charge a higher rate for an FHA 203k loan so it doesn’t make sense to worry about paying 10%-12% on a $5000 credit card charge compared to paying an extra .25% on a $200,000 or more mortgage for 30 years.

If your client decides to use an FHA 203k loan and only wants to do the minimum repairs, I would highly recommend you encourage them to get as much done to the home as they can with the FHA 203k.  There are plenty of stories of homebuyers who had grand renovation plans – none of which got done after closing because life got in the way.  At today’s rates, money is cheap and inflation will make a mortgage even cheaper so when if you are going to use the FHA 203k, use it the maximum extent possible.

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FHA 203k Loans and Buying HUD homes

Posted on September 5, 2011 by Chris Ognek

The FHA 203k loan is powerful in and of itself but when buying government foreclosures, like HUD listed properties, it is particular useful.  HUD doesn’t do any work on their homes.  The sale is strictly “as is” so if there are lender required repairs that need to be done, the deal will die.  Using an FHA 203k loan on HUD foreclosures is almost always the best way to go.  There are some HUD homes however that don’t need major repairs with an FHA 203k but that do need some repairs to meet the minimum FHA standards.  There is a little known guideline in the FHA lending rules that allows for up to a $5,000 repair escrow at closing for repairs.  It works just like an FHA 203k repair escrow but without being an FHA 203k loan.  The $5,000 becomes part of the mortgage balance and is paid by the buyer, not HUD.  Your challenge you may have with using this option instead of the FHA 203k loan is that you’ll have to find a lender that will allow the repair escrow.  Even though its in the FHA guidelines, few lenders actually do it.

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The Secret to Real Estate Sales with the FHA 203k

Posted on August 26, 2011 by Chris Ognek

The secret to real estate sales isn’t learning how to sell better – its learning how to solve problems better.  There is no better tool in real estate to solve problems with than the FHA 203k loan.  When I get a new lead or prospect that I’m trying to convert into a client, I’m not thinking about what I have to do to get them to buy a home, I’m thinking about what I have to do to help them solve their home buying “problem.”  For a home buyer, the “problem” is they need a home and the elements of that problem include location, size, price, condition, floor plan, amenities and more.  The FHA 203k loan is all you need to increase your sales by solving more clients’ “problems.”

Location is the one thing you can’t change with an FHA 203k loan (actually you can move a  home with a 203k loan but that’s not really something we want to make part of our business model) so once you’ve determined the right location with your clients, the next phase of the problem solving is to find a home that solves their other home “problems,” which is another way of saying a home that meets their needs and wants.  As agents, it’s hard to find great houses these days.  In markets full of short sales (20% of sales currently) and foreclosures (31% of sales currently) we need a way to deliver the highest quality product to our clients – and the FHA 203k loan is the way to do that.

Don’t waste your time trying to find a great home for you clients, just create one with the FHA 203k home renovation loan.  Using the FHA 203k loan can actually be an easier and faster way to buy and sell homes, particularly with lower priced buyers.

Will you ever find a 100% solution?  No, not even with an FHA 203k loan, but you’ll get closer to a 100% solution with an FHA 203k loan at your side than with any other method.  You and your clients are literally missing out on 50% of the market when the FHA 203k is not a part of your tool bag.

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Exterior FHA 203k Renovation Ideas

Posted on August 21, 2011 by Chris Ognek

Often times when doing an FHA 203k home renovation, much of the budget gets eaten up on interior renovations with the occasional window, HVAC or roof replacement eating up a large portion of the 203k budget.  Here are before and after pictures of a fantastic way – and a great color – to freshen up the exterior of a brick home when doing an FHA 203k renovation.  I have only seen two exterior brick colors that have really looked good – this color, which is a colonial grey, and a light shade of yellow.

The FHA 203k loan program will allow you to do any sort of exterior renovation you can fit in the budget – paint, vinyl, wood, or stucco (these are listed in order of least expensive to most expensive).  The decision comes down to two things – how big of a 203k budget does the home buyer have and what is the 203k home buyer’s preference.  I don’t think anyone would say this home doesn’t look absolutely fantastic!  And, when dealing with a tight FHA 203k renovation budget, paint is an excellent alternative to major exterior renovations.  A gallon of exterior brick paint is still only about $25 and then the rest is just labor and some costs for pointing up the brick before painting – all of which can be included in the FHA 203k renovation plan.

If you have any before/after pictures of your exterior projects, please email them to me at chris@my203kagent.com – I would love to share the creativity with everyone.

 

 

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New Renovation Project Started Today!

Posted on August 18, 2011 by Chris Ognek

We’ve got a great new renovation project that just started today!  I’m documenting this whole project on video and in pictures so you can really see what you can do with an FHA 203k loan.  This is an  holder home that needs a lot of work so this is a big project – but it will be done in about 40 days.  Pictures are worth a 1,000 words and I know once you and your clients see this project when its completed, both of you will want to do an FHA 203k loan.  You will see in this home just how easy it can be to create the lifestyle you want and deserve in the home of your choosing.

This home needs a lot of work and many prospective FHA 203k homebuyers get apprehensive about the 203k because they tend to think of all the things that could go wrong rather than how much will go right.  When you work with professionals, those risks get mitigated and I will tell you that in the years I’ve been doing FHA 203k loans with clients and other real estate agents, I’ve only had 1 project that had to tap into the 203k contingency reserve and it was for a small electrical problem.  Not a big deal at all.

Some of the things you can’t see in the pictures are the single pane windows, rusted out water heater and dirty ducts.  The kitchen actually has great cabinets but the previous attempt at updating the kitchen was done so poorly, we’re replacing all of them with a new design.  Finally, the back wall of the rec room has water damage and mold because there is no gutter on the back roof line and the masonry has a slight angle towards the home instead of the away.  The FHA 203k is taking care of all of these issues.  Every house is sellable with the FHA 203k at your side!

When you are doing an FHA 203k loan, the key to success is good planning in the beginning.  Creating a home with an FHA 203k is a fun and exciting process, and its even more fun when the job goes exactly as planned.  Be very specific during the FHA 203k planning phase but also remain flexible – small things can pop up but we just deal with them as professionals.

I’m going to turn this project into a great educational video for you to use to show clients how great an FHA 203k loan can be.  With the FHA 203k as part of your skill set, you’ll be able to deliver the best possible home for the money to your clients and provide a level of service far beyond other agents.

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EQ – Emotional Intelligence

Posted on August 15, 2011 by Chris Ognek

A working of the last Q, Emotional Intelligence, is critical for everyone to understand, no matter what business they are in.  We all already use emotional intelligence to some degree but in the real estate business, especially when doing FHA 203k renovations, its vital to have a working understand of how emotional intelligence works.

Emotional intelligence is the ability to recognize and interpret someone’s emotions and then use that information to guide their thinking and actions.  In real estate, there is so much emotional dynamic involved with not only buying or selling a home but also between husbands and wives.  All of the emotions can come into play, the most dominant of which is fear.

Learning to recognize what emotions are driving your clients wants, needs and desires can help you guide them to either overcome some of their fears, some of which may be unfounded, and make a better decision for themselves or just to guide them through the process more efficiently and productively.

When you do an FHA 203k renovation, the emotions I typically see are fear that the house will become a money pit, fear that the contractor won’t do a great job (not just a good job but a great job), the general fears that go along with buying a house, i.e. “are we making a good decision.”

I think in a 203k, those fears can be amplified because a total home makeover is not something most buyers do in their lifetime.  They need a rock to lean on for support – and with an understanding of emotional intelligence and the ability t recognize the emotional state of your clients, you’ll be able to provide a level of service to your clients that far exceeds what most agents are capable of.

Of all the Q’s, this one is perhaps the most important because if your clients don’t think you care about them, you won’t earn their business and they won’t benefit from all your other Q skills.

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TQ – Technology Intelligence

Posted on August 11, 2011 by Chris Ognek

Technology intelligence is something that most of us already consciously engage in but we may never feel like we are maximizing technology to our maximum benefit.  In many cases – like the behavior of checking email every 5 minutes – technology can actually be a hindrance and detrimental to our business.  We constantly need to focus our behaviors and tools on the highest and best use of our time, not necessarily on what we “feel” like doing.

Whether you are doing an FHA 203k renovation with a client or just a regular sale, there is an incredibly useful tool that is sweeping the country called The Listing Book.  Its been in my market area for over 2 years and I’m still amazed at how few of the agents who attend my seminars are using it.  It is hands down the best lead incubation and client management tool out there.

The Listing Book attaches directly to your local MLS and is a free online search tool.  The benefit to your client is they get an easy to use home search management tool that ensures they get the most up to date information available.  Ever have a client send you a listing they found on a national brokerage site that’s been off the market for two months?  It’s a monumental waste of time for everyone.  Listing Book also provides your clients a means to save and track their favorite listings.  Clients can also make notes on individual properties, all of which you can see.

The benefits to the agent are incredibly powerful.  Your clients get to manage their own searches and tell you which homes they are interested in which saves you time.  Every day the agent gets a report on the activities of each client within Listing Book.  You can see who saved properties, who asked questions, who spent time searching and for how long.  If you use the reports intelligently, you can time your follow up calls and emails to correspond with your high activity clients and focus your efforts on the clients who have the highest probability of generating revenue.

The Listing Book is one of the “must have” technology tools for any agent in any market – it will save you time, money and hassles.  It epitomizes Technology Intelligence in your business.

 

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Book Release Update

Posted on July 28, 2011 by Chris Ognek

My book, “The Market Multiplier System for Real Estate Agents” is in final editing now!  It will be released shortly so if you haven’t already subscribed to the blog and newsletter, please do that and we’ll let you know as soon as its released.  It will be available in all formats – ebook, kindle, ibooks, and hard copy via Amazon.

I’m really excited about the video training program too. I’ve been traveling giving my sales system training and in every event, we’re able to put together several deals for agents by using my techniques because every brokerage has agents with buyers who can’t find them a home and put a deal together.  The Market Multiplier System will help you close more transactions in less time than any other real estate sales method.

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FQ – Financial Inelligence

Posted on July 24, 2011 by Chris Ognek

The next Q factor is FQ – Financial Intelligence.  This Q factor is crucial for a real estate agent.   Financial Intelligence serves to help clients make the best possible financial decisions regarding their home purchase but it is also serves to help show them the financial advantages of the FHA 203k home renovation program.  Moving into a home with equity is just one such advantage.

Whenever I work with a client, I always include some words on the financial considerations of buying a home and I work to help my clients match their home purchase with their bigger picture financial goals – be it a regular purchase or an FHA 203k purchase.  You may find that in the course of discussing finances, the FHA 203k is the only option for your client to reach their stated goals.   And, their goals may be as simple as being able to buy a home of their own – any home.

For example,  (every agent sees this at one point or another) the client has set a maximum limit on what they want their monthly payments to be, which is far below their actual mortgage limit.  Or, the client’s income is limited and their maximum mortgage amount isn’t enough to buy what they want or need.  Your challenge then, as the real estate agent, is to find them an acceptable home within their budget.  Many times, the answer will be in the FHA 203k option because that is the only loan program available to use on the distressed, discounted, and “unlendable” homes.  (At this point though you should know that every house is lendable when you have the FHA 203k in your tool bag.)

Many times I have had clients that were either limited in their budgets or had purposely chosen to limit their monthly cost of housing expenditures and the FHA 203k was the vehicle I used to deliver the best possible home for the least amount of money.  Most agents would fail at closing transactions with these types of buyers but the FHA 203k loan has helped me convert many lower budget clients into closed transactions.  It has added up to tens of thousands of dollars of extra revenue over the last few years.

Let’s face it, in this challenging market, we as real estate agents need every possible tool at our disposal to maximize opportunities and turn leads into revenue generating transactions.  The FHA 203k and the system I’ve created in the Market Multiplier System have done this better for me than any other system I have ever used or seen.  And now, its doing it for the agents I’ve taught the Market Multiplier System.

 

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What does the Q mean?

Posted on July 21, 2011 by Chris Ognek

I often get asked “what does the Q stand for” and that is a very good question.  One of the reasons we named our business “Q Real Estate” was because we wanted people to ask that very question.  When we were deciding on a name, we wanted it to represent what made us different.  The answer was that the way we did real estate was “Smarter Real Estate” and “Q Real Estate: Solutions for Buyers and Sellers” was born.

There are 5 Q’s that represent the 5 critical skills, or 5 intelligences every agent needs in order to deliver top tier service to their clients.  Over the next few posts I’ll explain them and how they apply to running your business with the Market Multiplier System and the FHA 203k loan.

The first Q factor is RQ – Real Estate Intelligence.  It sounds obvious but many agents lack a basic understanding of how real estate really works as a business.  I was rapidly able to distinguish myself from other agents in my market because I took the time to learn everything there was to know about putting real estate deals together – and I did it by studying real estate investment books.

That was critical because the helping clients take advantage of the FHA 203k loan program is in many cases the exact same methodology an investor uses to profit from real estate.

You don’t have to be a real estate investor in order to know and understand the real estate investment process but I think you do need to understand the principles of real estate investment in order to be a top performing agent.  You can run a great business by applying the skills I teach in the Market Multiplier System and will have no problem helping clients buy and sell homes with the FHA 203k loan program – but I think you’ll be able to run an even better business by improving your Real Estate Intelligence.

 

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