Home renovations should be seen as a tool for getting your clients more home for their money, a higher return on their investment and the ability to turn their “right now” home into their “forever” home. It’s a lot of work, and clients can become justifiably hesitant. Knowing how to put them at ease is crucial in assisting them in realizing their home goals.
Is It Better to Buy a Cheap House and Renovate?
If your clients have decided to move or buy for the first time, look at a variety of houses in different stages of completeness. Helping your client evaluate the options will go a long way toward making them comfortable with their final decision.
The best thing to do is provide great advice regarding some of the advantages and disadvantages of buying a fixer-upper, and let them make the final call. One obvious advantage is the cost of a fixer-upper versus a move-in-ready home. By coming in at a purchase price well below their budget, your clients will have money left over for improvements, making it more desirable for them and increasing its value.
Make sure they understand that they don’t have to remodel everything in the home right away. Educate them on which home improvements add the most value. Kitchen renovations tend to get the most bang for their buck. Adding a shed, not so much.
Disadvantages to buying a fixer-upper are usually that it’s more work than they can handle or it requires getting in over their heads financially. A strong buyer beware message is key.
Can You Get a Home Loan on a House That Needs Work?
Refer your clients to a lender who’s well versed in their options and can take them through the finer points. Most lenders will decline their loan unless they use a licensed builder to repair or renovate their property. It’s important they know all their options when it comes to renovation loans.
FHA 203(k): Federal Housing Administration loans can be used for most improvement projects and are a good option for buyers facing lower income and/or credit scores.
HomeStyle: Guaranteed by Fannie Mae, these mortgages require higher credit scores than FHA loans, but they can be used for almost any improvement.
VA Renovation Loan: Department of Veterans Affairs loans include the purchase and renovation of a home. However, there are some limitations, like the need for a VA-approved contractor.
HELOC: A home equity line of credit can be a great option for clients who don’t want to move and have built some equity in their home.
Clients can be hesitant when it comes to renovations for a variety of reasons. Explore the specifics that are producing anxiety and help them work through evaluating all the options available.