The FHA Remodel Express Loan
Buyers and sellers: Having property challenges?
A high percentage of homes on the market right now are listed as “short sales” or “foreclosure” (bank-owned) properties——and with those can come issues——neglected homes in need of repairs such as new roofs, flooring, windows, etc. Banks selling these properties typically don’t want to invest any money into improvements, but lenders on the other side of the transaction often won’t accept the property in its current condition (a.k.a. “as is”). Even in normal resale listings, sellers are often financially distressed and can’t afford to make additional improvements to sell the home. Unless the buyer has a “cash” offer, those homes have few options to get sold. In response, Wells Fargo Home Mortgage has developed an innovative and easy to understand program to solve these issues. Named the Remodel Express, it’s a simplified version of the popular (yet complex) FHA 203k loan, and offers buyers a turn-key solution to homes in need of repair.
Here’s how it works: it’s an FHA limited-repair (non-structural) loan allowing the buyer to purchase and renovate a home utilizing a national home improvement company to do the remodeling. The maximum repair cost is $35,000. The buyer picks either The Home Depot, Lowe’s, or Sears to do the repairs——after evaluating the property, the chosen company prepares a bid for repair/remodeling labor and material costs via a “project coordinator”. Once accepted, the bid is provided to the appraiser so that an “after improved” value can be determined. Work can include the repair/replacement of roofs, HVAC systems, painting, plumbing, electrical, fencing, flooring (wood, carpet, etc.), remodeling of kitchens and bathrooms, windows, appliances, and more. Basically, anything non-structural in nature. After closing, a check is sent to the borrower, made payable to the home improvement company. Repairs have to be made within six months.
The upside? The buyer gets to work with one contractor (selecting contractors can be ime consuming), with a licensed professional, and with a national company that has the financial resources to complete the job and stand behind it. The buyer gets savings on materials (national companies often have greater buying power than smaller contractors), and they get to eliminate contractor validation of licenses/insurance. Furthermore, it’s one closing, with one loan, and one pre-determined payment.
Is this innovative loan product going to singlehandedly revive the housing market? Not by a long shot….but it will certainly fill a much needed niche to move otherwise unsellable homes.
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